Fund distribution plays an enormous role in the success of an investment fund. The asset manager’s distribution strategy should include fund marketing, fund communication, knowledge of distribution channels and regulation, and the construction of tools to measure the distribution risk.
This is certainly not an easy task for the fund, the asset manager must cope to provide optimal distribution for today but must keep one eye on what is coming down the pipeline. The top funds are proactive and well prepared.
Understanding the full scope of distribution
Fund distribution is not complete without fund marketing and fund communication. These two components are often neglected and thus can result in the fund making a negative impression unbeknownst to the fund manager. In a congested sector, of over 25,000+ funds, investing in marketing and communication post AIFMD is critical. It is no coincidence that the most successful funds have strong brands and use communication strategy as a competitive advantage. Having a strong brand and identity helps strengthen the trust between investor and the fund. Strong communication strategy strengthens the relationship between the investor and the fund.
Understanding each jurisdiction’s distribution channels
Knowledge of the distribution channels per targeted jurisdiction is of course vital for building an effective distribution strategy. Each market differs from the next in terms of public offering listing, regulated public distribution, private placement, local distribution networks, regulatory requirements and more.
Understanding your distribution partners
The distribution network is still viewed as complex and somewhat opaque. A fund should make sure to complete full due diligence on the distribution network and on would be distribution partners. From there the fund needs to grow a strong relationship with the local distributors and agents on a business and operations level.
Understanding the regulatory environment
Complying with local regulatory requirements is an area that needs constant supervision as regulations are constantly changing. Asset managers working with fund lawyers will need to get to grips with regulatory requirements on local agents, eligibility, investor disclosure, registration and continued registration, and marketing.
Understanding future challenges
An adept asset manager will be looking at what the future holds for the industry and will have the fund prepared. For the near future in the asset management sector we can see the following:
- An almost complete move from the traditional style of marketing to digital marketing. And the ‘Death of PDF’ in 2016.
- An even greater evolution of fund products to match investor demand
- The emergence of new distribution channels
- The wide use of video to engage prospects taking into account the IT savvy nature of the ‘next generation of investors’
An awful lot for the asset manager to contend with and this is why so many look to outsource the majority of these tasks to Finscoms thus freeing up time and providing comfort that operations will run smoothly and cost effectively.
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Ken Carmody
kmc@finscoms.com
