Many asset managers view crossborder fund registration as a formality.
For those who are getting cross-border fund registration right, going into a foreign market is business decision and registrations is one small step in a complex distribution process. True added value distribution service takes you well beyond just registration.
Eligible? For what sort of distribution?
There are generally two or three possible models to target investors in most target distribution markets:
- Public distribution – marketing to all types of investors subject to a fully regulated regime ;
- Public offer – listing on a securities market subject, inter alia, to relevant listing requirements for securities ;
- Private placement – placement with a limited circle of investors, such as qualified investors, subject to less onerous regulatory requirements than public distribution.
The asset manager should understand the distribution models in the target jurisdiction, the regulatory requirements and limitations, and verify whether the fund is eligible for registration under one or more of these models.
“TO SUCCESSFULLY PREPARE FOR A CROSS-BORDER FUND DISTRIBUTION, A MANAGEMENT COMPANY SHOULD INVEST TO UNDERSTAND THE LOCAL REGULATORY REQUIREMENTS. ” A PROFITABLE VENTURE?
The asset manager should aim to raise sufficient capital in the target market to be profitable, taking into account all the costs related to the marketing and registration of the fund.
Registration should be a business decision based on:
- Access to sales forces to market the fund locally – generally local distribution channels ;
- An analysis of the market potential of its fund in the target market, covering, inter alia, potential investors, appetite for the type of product, competition from local and foreign funds, distribution models and existing local relationships.
Well prepared?
To successfully prepare for a cross-border fund distribution, a management company should invest to understand the local regulatory requirements with a view to complying from day one and on an ongoing basis. In the short term, well-prepared fund distribution is much more efficient and substantially increases the probability of successful registration or approval. In the medium to long term, well-prepared fund distribution mitigates the risks inherent in cross-border distribution in a target jurisdiction, such as the regulatory risk. Failure to meet regulatory requirements increasingly entails costs (such as those related to rectification of the failure) and, with supervisory authorities becoming increasingly vigilant, sanctions (such as publication of breaches, withdrawal of authorisation, prohibition, fines, and bans from holding office).