Research from Cerulli Associates suggests that alternative mangers looking to launch on Ucits platforms have to compromise on issues of performance and fees in order to gain access to the distribution benefits that such platforms may offer.
The findings come in the latest edition of The Cerulli Edge – Global Edition, which has has also looked at the relative merits of standardised bank and asset manager platforms versus independent platforms. The former “can offer potentially game-changing distribution for subadvisors” while the latter “are usually cheaper and more flexible”.
It is important to note that use of a platform does not guarantee large inflows, given that there tends to be a skew towards funds with long track records, the research suggests.
Justina Deveikyte, associate director of European institutional research at Cerulli, added: “The combination of platform fees and restrictions on investment strategy by operators may exacerbate the issue of performance erosion often associated with operating under the Ucits framework, making platforms unattractive for some alternative managers.”
As it has become harder to raise funds offshore, more managers are seeking to place themselves within the Ucits regime, and for those unfamiliar with the rules, using a platform can make sense. Benefits cited include “plug-and-play”, minimal administrative burdens and established distribution networks – possibly ideal for those who do not want to apply for a full alternative investment fund (AIF) licence, Deveikyte added.
But there are challenges tool
“While the subadvisor retains general control over asset selection and the operator is responsible for risk control and regulatory compliance, the platform operator technically becomes the manager of the fund once it is onboarded, and platform agreements will often prohibit the use of certain instruments or investments. This can be particularly restrictive for hedge funds and alternative managers used to having total freedom in how they execute their strategies,” Cerulli notes.