[ T H O U G H T L E A D E R S H I P | C S C ]
Anne Anquillare CFA , head of fund services , North America , CSC
Agnes Chen , managing director , APAC , CSC
Paul Whelan , managing director – depositary services , CSC
AC : There are five core ways to prepare for this evolution . I would say the first thing is to prepare to scale in terms of size and expertise . Secondly , prioritise investor experience , as fund-raising is always a priority for fund managers . Third , develop regulatory agility and ensure regulatory guidelines are always reviewed and updated with new legislation . Fourth , adopt global standards to ensure quality and transparency . And finally , perhaps look at the shift of mindset from a fund-launch mindset to a fund-lifecycle mindset .
JW : Why is the ability to scale important , and how can fund managers become more scalable ? AC : Fund managers will need to be ready to launch larger funds or consider new jurisdictions . To achieve this requires processes and frameworks that can scale without introducing more risks or challenges . Fund managers need a service partner who can support best practices at every step , from fund formation to fund operations to realisation and all the way to maturity and liquidation .
JW : What does it mean to shift from a ‘ fund-launch ’ to a ‘ fund-lifecycle ’ mindset ? PW : In the past , managers could focus primarily on the fund-raising and the launch of the fund . However , competition for allocations and the complexity of the regulatory environment have brought end-to-end fund operations more into the spotlight . As Anne said , it was once about alpha generation alone , but this is no longer sufficient to attract investors . The scope and intensity of investor due diligence reviews has increased , and investors are looking at the fund manager ’ s ability to plan and coordinate across the lifespan of the fund and across multiple domains of expertise , including areas such as administration , reporting , investor services , SPV management , and corporate service .
Fund service providers are striving to become global full-service enterprises , primarily through merger and acquisition activity , which is evidenced by more than 100 fund service provider deals taking place in the last 10 years .
JW : It must be important not to forget about the investor experience side of this . AA : At the end of the day , no matter how much due diligence they do , no matter how much analysis on previous performance and the manager themselves , it is still a leap of faith when they commit to a new fund . That ' s where the trust comes in . PW : We can talk about technology , the digitisation of the investor experience , and onboarding of investors , but I think the key word there was trust . The trust has been built by people and not by technology . The experience the investor gets dealing with people in fund service providers is crucially important .
JW : To conclude , perhaps each of you could just share some final thoughts or parting advice on this matter ?
AC : Regulatory compliance , as well as keeping yourself updated , is important every step of the way , because every day things are changing , regulations are coming up , and investors are looking for more answers from fund managers . They require more explanations , and so you need to be prepared . AA : What we ' re seeing is the rapid expansion of the types of investors coming into the private capital market , with the SEC broadening the definition of accredited investors . You hear wealth managers talking a lot with their clients about being able to offer proprietary products , which means private capital in some way customised for their clientele . So you ' re seeing this whole influx of capital coming from a much different source than we saw in the past , coupled with the still very attractive returns that are provided to institutional investors . PW : We ' ve all witnessed how the private capital market has grown incredibly quickly , and we expect that trend to continue and accelerate certainly in Europe over the next five to 10 years . In Europe we have the European Longterm Investment Funds (“ ELTIF ”), which will facilitate retail capital flows into private markets . It will also be interesting to see the impact of tokenisation of real assets in the private markets , how the use of blockchain will eliminate paper-based processes and provide an immutable record of fund and asset ownership . The digitalisation of fund service providers , and indeed GPs and investment managers , will continue .
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