While many traditional asset managers are struggling amid intense fee pressures and increased market volatility, Brexit has seen third-party Mancos become a major force in the EU investment management industry. Not only have the number of Mancos exploded in recent years, but assets under management continue to soar too, as more investment firms embrace Mancos for their expertise, service, technology and distribution.
Not all Mancos offer the same level service, however, and there will be clear winners in the future, particularly given the raft of new entrants and ongoing consolidation. Increasingly, too, clients expect Mancos to assist with operational tasks, offer data aggregation and risk management, and help them stay ahead of the regulatory and technological curve. That’s no easy task.
So, how can Mancos expand their offerings, digitise their services, and grow their business? And how can leading technology providers help them to stay ahead of their competitors?
A more challenging environment
The Brexit fallout, which left investment managers scrambling to keep access to the single market, may have offered a tailwind for Manco firms, but the next few years could prove more difficult. Although there are clear opportunities when it comes to expansion and new alternative and ESG funds to onboard, particularly in the wake of the new SFDR regulation, there are also a number of challenges that firms will have to tackle head on.
Perhaps most important is the need to continue to offer robust services in a more difficult, complex and competitive environment. The disruption last year as a result of Covid-19, for instance, would have put many Manco business continuity plans, as well as remote access solutions, to the test. Many will be operating somewhat differently from now on. And if anything, it may well have sped up the digital transformation of many firms.
As the fight for scale heats up, finding key service enablers, such as technology data aggregation and digitisation, are fast becoming key priorities for many firms.
In fact, the past few years has seen strong growth in third-party Mancos and smaller AIFMs in Luxembourg, Ireland and Guernsey. What these firms sometimes lack in size, they often make up in other areas, be it specialisation (especially alternatives and niche strategies such as crypto), client services, risk and portfolio management, or technological solutions.
At the same time, next-generation Mancos, especially those merging or consolidating, are growing larger and more sophisticated as well. That means that Mancos are having to offer a wider suite of services, such as liquidity stress tests or SFDR solutions, and can ill-afford to become complacent.
All this is happening as the pressure on fees, while not as great as those facing traditional investment managers, shows few signs of abating. That’s particularly true with the need to show substance, including adding additional operations or headcount, and the need to offer new services in order to keep up to speed with one’s competition.
Digitise and grow
Given the more challenging and competitive environment, many Mancos and their service providers are partnering with technology firms specialised in risk reporting and monitoring solutions. Not only can third-party technology firms help them digitise and streamline their existing workflow, but they can also assist in reducing complexity too.
A fully integrated back, middle and front office platform solution, for instance, can help Mancos cope with their diverse requirements, including pre and post-trade compliance, performance reporting, and regulatory reporting, across multiple jurisdictions. This can save on IT and headcount, allowing Mancos to focus on their core service capabilities, while offering key assurances to clients.
More than that, though, a good third party solution should also allow firms to grow and expand their services too. In speaking to a range of leading Mancos and Asset Service Providers recently, AQMetrics has heard that many firms, especially mid to large incumbent companies, simply don’t have the in-house technology experts to build leading solutions and keep up with the regulatory curve.
Furthermore, hiring experts to build solutions often isn’t cost effective, and so many Mancos prefer to partner with leading technologists and regulatory experts who can deliver turnkey solutions to meet their needs.
Third-party partnerships are becoming more important given the increased competition too, letting Mancos stay ahead of the regulatory and technological curve. Regulatory technology platforms, for example, are designed specifically to meet the regulatory risk management needs of today, whilst automatically evolving when needed to comply with the emerging regulations of the future.
With a lot of regulatory change coming down the pipeline in the near future, including the harmonisation of AIF and UCITS and SFDR, as well a renewed focus on risk and liquidity, it’s important to know that you’ll always have the right solutions for your clients.
Future-proof your business
Finally, a leading technology partner can ensure that you’re at the cutting edge of innovation too, future proofing your business and allowing you to compete with new entrants and next generation Mancos. If you want to expand your service, a third-party can often help you to do this without having to make additional hires.
Partnering with a leading technology platform can also allow Mancos to grow and scale their business, and there is real flexibility here – as well as saving time and reducing complexity, firms are able to scale as fast as they want. This gives Mancos the ability to focus on key growth areas, such as new jurisdictions, regulatory demands, assets or fund types, rather than getting bogged down in more detail oriented tasks or additional hiring, which can be outsourced or automated.
Ultimately, while the Manco industry is likely to grow from strength to strength, there will be clear winners and losers as the fight for scale and market share heats up. As the competition grows, the best technology can help you stand apart.