“The strategy should be based on a robust analysis of the target market”, Nicolas Muller said.
RAISING CAPITAL CROSS-BORDER RARELY HAPPENS BY ACCIDENT. ALL ALONG THE FUND VALUE CHAIN, FROM THE BOARD ROOM TO THE REGISTRAR AGENT FUNCTION, FUND DISTRIBUTION DEVELOPED FROM A HOT TOPIC STATUS TO AN ABSOLUTE NECESSITY.
WHEREAS FUND REGISTRATION DONE BY THE RULES IS A MAJOR ACHIEVEMENT IN THIS FRAMEWORK, THREE ADDITIONAL ELEMENTS SHOULD CERTAINLY BE PART OF THE DISTRIBUTOR’S CONSIDERATIONS.
Choose the target markets
46% of EU CIS collect less than 50 M€ per distributed market.
29% collect less than 10 M€ (source: Broadridge, 24 000 EU CIS in sample).
These simple statistics demonstrate that fund registration by itself does not guarantee cross-border distribution.
A solid distribution strategy should be established ahead of market entry. The strategy should be based on a robust analysis of the target market. A cost-benefit analysis permits the expected amount of assets collected to be weighed against the registration and distribution costs and risks that vary significantly from one target registration country to another.
Go-to-Market
Despite regulator to regulator enhanced collaboration and pan-European harmonization under UCITS and AIFMD, local regimes still mean that the asset manager needs to adapt to market-specific rules:
- From a cost perspective: registration fees and maintenance fees, translation fees, legal fees, requirements to appoint local agents such as paying agents, compliance with local marketing material rules are to be considered in addition to the cost of sales and promotion.
- From a risk perspective: The expansion of the distribution network implies enhanced risk including legal, regulatory, compliance, operational and tax risks for the fund and its investors as well as for the asset manager.
The conjunction of the above factors has to be balanced with the additional revenues expected from the foreign registration country.
Grow-the-Market
From fund supermarkets to institutional distribution channels, Independent Financial Advisors, third party marketers and internal sales forces, there are numerous levels at which funds can meet their future investors. Selecting those entails a long term plan built with the same ingredients used to evaluate every partner or sub-contractor: market insight, reputation, due diligence and especially education.
Who needs to market your funds abroad must have a sound understanding of your investment culture and values to match supply and demand.