For emerging managers – any firm newly launching into the asset management market – choosing partners is a crucial exercise, and that includes the fund domicile. Elliot Refson, head of funds at Jersey Finance, expands on the issue and introduces Funds Europe’s emerging managers survey.
While some emerging fund managers may well possess significant amounts of experience and know-how, particularly if they are spin-outs from larger houses, many are nevertheless presented with a number of specific challenges when it comes to getting their operation and first funds off the ground. Access to investor capital, finite resources, time and costs are all potential issues. This makes choosing partners – including a domicile – who understand the emerging manager market absolutely critical.
Whereas established managers will already have networks and processes in place, emerging managers are essentially starting from scratch and getting off to a good start is fundamental not only to an initial launch, but to the ongoing success of a fund and subsequent fund launches.
Choosing a domicile is vital for all alternative managers, of course. As the world emerges from the pandemic and as political fragmentation persists, secure, safe and certain conduits for supporting targeted and efficient capital flows have become highly prized.
However, the issue comes into particularly sharp focus for emerging managers who are highly time- and cost-sensitive. As such, having a reliable, robust platform on which to build a fund operation is key to supporting success in the longer term.
There is also the persistent issue of regulatory certainty, with a plethora of regulatory activity currently under way globally - EU pre-marketing rules, AIFMD II proposals, ESG regulation, and anti-money laundering rules, for example.
For emerging managers, this can be a minefield to navigate and jurisdictions able to combine a minimal change outlook from a regulatory, legal and economic perspective, with a world-class infrastructure will be in significant demand.
Cost, flexibility and access
Cost is also likely to be a far more sensitive issue than for more established managers, and domiciles wishing to stay ahead of the curve need to acknowledge that by offering innovative, flexible solutions.
For example, some managers may be looking for structuring options only for their funds while others may be looking for more holistic support - from ‘manager of managed entity’ (MOME) platforms through to a full manager relocation.
In addition, when it comes to distribution and market access, those jurisdictions that are well-placed to support non-EU - including the UK - managers to access EU investor capital in an efficient, cost-effective way while also being able to connect with investors further afield will be particularly desirable.
A further key issue for first time managers is around accessibility to expert support. Particularly when launching an operation or a fund, being able to tap easily into specific knowledge around, for example, governance, substance or taxation, can save significant amounts of highly precious time and money.
The social capital of a domicile and its ability to offer opportunities to meet on-the-ground experts in diverse, specialist areas easily, can be a real selling point.
Emerging managers face a number of difficult decisions when establishing themselves, and domicile selection is clearly one of them. Getting it right at the start can make a huge difference – this survey with Funds Europe will provide valuable insights into that decision making journey.
The survey is now closed - look out for our upcoming research report on emerging managers, coming this July.
*Elliot Refson is head of funds at Jersey Finance
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