6 April 2020

Destination, almost anywhere

There’s a saying that goes something like this: “It’s not the destination, it’s the journey”. One exception, however, is the growth of your fund. More destinations with more potential investors and more assets under management. We take a look at destinations, why they are an important part of growth.

European regulators have tried to make it as easy as possible for UCITS (and more recently AIFs) to be passported and distributed across borders, which is one of the key drivers behind the industry’s spectacular growth over the past thirty years. Cross border distribution has to be at the core of any asset managers’ strategy for growth because the majority of potential investors for a fund will not be located in the country of domicile.

To attract significant inflows of assets, you need to tap into a broad landscape of destinations in national and global markets. But it’s not about turning the switch on to as many destinations as you can find. To achieve profitable growth, you need to know the environment in which you operate quite specifically and what marketplaces are more suited for your funds. Today this could be different European countries, or global places like Asia or South America. Tomorrow it may be somewhere else, the world is ever changing and so should your distribution footprint.

Figuring out the right market is still only part of the story. You also need to know how to reach investors within those market, and to do that you need to select the right destinations. Are global platforms better for your funds? What are the advantages of 3rd party distributors? Are traditional media still relevant?

Not all destinations are the same

At Kneip we think of destinations as entry points for advertising funds to potential investors. These can be data vendors, third party distributors, newspapers or media. We think of them in the hundreds but it’s hard to put a number to them. There are obvious destinations, and most people in charge of distribution for asset managers can probably draw up a list of 20-30 of them. But there are many more, and a long tail of smaller and specialized destinations in every market.

Depending on your strategy and fund type, some destination may be more suited than other. Each destination is unique. Each has its own focus. Each understands what is significant to their particular audience and what rules and regulations it needs to follow in their specific markets. Each destination operates and makes data available to its clients in a certain way. This impacts how they capture your fund data and documents, what they will make available to investors, or how they will rate your funds. For example, wealth managers won’t be interested in the same data as institutional buyer. Marketing departments across the board will look at it from a very different angle. And then there’s traditional media, print media. Are they even still relevant? We know they are, yet they are being underused.

Finding the destinations that are right for your funds

Today distribution platforms are critical to add exposure and scope. Selling funds to a global audience without them would be like avoiding Amazon to sell books. The difficulty comes in selecting the right local and specialized destinations to make your funds visible to your target audience and for that you need the right knowledge and contacts. You may however define some criteria that influence your selection process of the “right” destination, such as audience, reach, data feeds, cost of publication etc. This will help you building the right knowledge to find the ones that are more likely to work for your funds` distribution.

Standing out for the right reasons

Standing out means that investors can easily find you. To do that you need to provide them with up-to-date, accurate data and documents about your funds. But that’s the bare minimum. Often standing out goes beyond that, it’s about making your funds more appealing than others to a certain audience. Take some of the obvious ones as an example: every asset manager wants their funds to be Lipper Leaders, or to have 5 stars on Morningstar. To do that you need to know how the ratings work and keep informed and reactive as their algorithms continue to evolve with particular data fields becoming key. If you don’t, then how do you even ensure today that your funds are picked by robot advisors and computer-based algorithms?

Of course these are just two very obvious examples. How do you stay on top of every single one of your destinations? And how well do you know them? For example, do you realise the regulatory importance of targeting the correct share classes to offer on different distribution platforms?

Stay compliant, become efficient

The flow of information from asset managers to vendors tends to look like a spider web. There are many different pipes going out from your teams to each of your destinations – may this be for NAVs, static data, KIIDs, Factsheets, EMTs, EPTs etc. You might disseminate low volume of multiple sets of data and documents to many different profiles. All profiles bring different challenges. Becoming more efficient in that process is critical, not only to keep your costs down but also because you need to make sure that the data you publish is accurate and consistent across all destinations. It is critical to any fund marketing or analysis, and your regulatory compliance depends on it as well as distributors, wealth manager and investors relying on this data in context of their investment decision processes (not to forget that robo-advisors absolutely do).

Ultimately any destination stands between you and your end investor, and this is where Kneip brings value. We’re completely neutral in the industry, and we work with a broad range of destinations, which is continuously growing, following your demand. We do not just understand how they work, we work with them as partners and we keep on top of any changes that we feedback to our clients. We can work with you operationally to ensure that your fund data and documents are published accurately and in the most efficient way – across all of your destinations. We’re also uniquely positioned to work with you strategically to help you figure out the best way to expand your distribution footprint and grow your business., by identifying those destinations, that suit your distribution strategy best.

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