Succeeding in international fund distribution today

Asset managers and fund promoters seeking to grow their business and investor base across borders must meet the needs of multiple actors. Such needs cover the entire fund life cycle, from initial set up to ongoing maintenance.

Furthermore, the investment fund world has changed. Investors now expect better access to information and services while regulators continue their push for greater transparency and financial inclusion. Combined with these is the continuing pressure on fees throughout the fund industry.

Selling investment funds in multiple jurisdictions means these issues are magnified and the choice of location and partners to support cross-border distribution becomes crucial.

The problem of two hats: regulatory and marketing

In this context, fund companies distributing internationally must wear two hats. They need to ensure all regulatory requirements are fulfilled and make sure that their marketing and distribution strategy is carried out effectively and as planned.
On the regulatory side, there are, for example, registration and passporting requirements. Later, funds must also meet the ongoing tax reporting, fund reporting and myriad other compliance requirements of multiple jurisdictions.

Additionally, fund producers that are involved in international distribution should stay up-to-date with any changes in all of the countries of distribution that could impact these requirements. They then need to be in a position to effectively respond to these changes.

On the distribution side, there is the significant challenge of due diligence and then oversight of their distribution network. Fund producers and asset managers need simple and clear lines of communication to get a true view of their distributors’ sales activities in order to make the right decisions. Done badly, this can be time-consuming and costly.

Information to investors is of vital importance. Investors, and indeed all companies and intermediaries along the distribution chain, need data and documents. All of these information flows should be fully traceable so that managers know who received what and when.

The Luxembourg ecosystem

The Spanish fund industry, as an example, is primarily oriented to its domestic market. Therefore, Spanish managers willing to offer their funds abroad will choose Luxembourg for this purpose. Luxembourg has exceptional experience as a hub for cross-border fund distribution. Its ecosystem includes service providers that can ensure a smooth transition from inception to the ongoing strategic and day-to-day needs of investment funds marketed internationally.

It is the recognised international leader for cross-border distribution. It owes its success to decades of innovation and the unique skillset that fund companies operating from Luxembourg have built up.

With its funds being distributed in more than 70 countries around the world, Luxembourg is truly the home of the global fund industry. Worldwide, more than 60 percent of authorisations for international distribution were from funds domiciled in the country. Concerning the distribution footprint, 41 per cent of these funds are marketed in 10 to more than 20 countries, while the remaining 59 percent were marketed in three to nine countries.

As a result of this expertise the country has a concentration of expert service providers that are specialised in meeting regulatory and distribution challenges.

Reduce complexity in a changing environment

The ideal solution to the double regulatory and marketing challenge is an infrastructure that offers solutions for both aspects. Such an infrastructure ensures that the information is consistent across actors and the right information is delivered automatically to the right actor at the right time.

This is especially important today when more and more data and documents are shared between all actors in the chain. Fund companies that master data flows and that view data holistically can generate fundamental shifts in both operational efficiency and value creation.

Operating as a fund market utility, Fundsquare, a subsidiary of the Luxembourg Stock Exchange, combines regulatory and information services for the fund industry and all along the distribution chain. Such a combination provides full transparency throughout a fund’s life cycle. It also enables fund companies to minimise time to market, ensure compliance, reduce costs and, above all, operate and market their funds efficiently and effectively.

Ultimately, fund companies that are able to have real-time views of their business can be much more responsive and gain insights. Thus they will be in a stronger position to develop better products for investors and create additional value.