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Hunting the Holy Grail
Global expansion is perhaps the most sought-after prize of the business world, and according to Calastone’s Rob Swan, visibility is the key to finding it

Distribution continues to remain at the top of the agenda for most investment managers and, depending on where within the industry you are, the term can have varying meanings, but ultimately it is about two things: the expansion of your distribution required to increase assets under management and, more personally, to ensure your end-of-year bonus.

Distribution expansion is costly and time consuming, requiring a level of detailed understanding of your business and the market to be able to make the right decisions. In turn, the pressure to begin raising assets at the earliest opportunity is huge, given the distribution expansion cost outlay.

But how confident are industry participants that they have all the information needed to make the right decisions regarding their distribution expansion strategies?

The industry has always suffered from the same issue—the lack of visibility and insight across its operating markets and its own organisations.

Over the years, very little has changed. With multiple investment managers, transfer agents and distributors operating in many different geographies, and data being fed back to a single investment manager in various different formats and frequencies, it is difficult to have a clear global picture of what is really happening.

Add to this the cost to integrate multiple disparate data feeds, the quality, consistency and availability of the data, together with addressing evolving regulatory changes, and you begin to understand some of the data challenges the modern investment manager faces. Such challenges can negatively impact the business in a variety of ways.

Understanding distribution

The first of these is having the ability to fully understand where fund sales are originating. At times, management information is only at the nominee level, and depending on your distribution strategy, these nominees may straddle many different countries.

This in turn may have a detrimental effect on how business development teams are rewarded, as a lack of detailed transparency prevents investment managers from understanding where such business originated.

Assessing new markets

The lack of a reliable, bottom-up view of your markets will significantly impact the way in which an investment manager is able to evaluate new market opportunities. This lack of detailed information will make understanding the distribution landscape more difficult, and will prevent investment managers from being able to carry out future trend analyses. Future trend analysis can rely too heavily on incomplete data used as a base to make important distribution decisions. The inability to fully understand market trends will hinder their ability to plan future market specific product launches.

Regulatory changes

With regulations constantly changing, and the need for investment managers to have a clearer idea of their target market, the need to understand where their business has come from is ever greater and likely to become far more onerous on the side of the fund manager. This is increasingly the case—the UK Financial Conduct Authority (FCA) recently tightened up the suitability position. As an FCA representative recently told a fund manager at a Markets in Financial Instruments Directive (MiFID) II conference: “If you are selling to a platform, then you are selling direct to the investor.”

Risk and costs are increased when the investment manager does not fully understand the distribution landscape. So what would the industry look like if such a greater level of transparency were available? Distribution market entry strategies would be more efficient for a start, being able to reduce costs and risk when entering a new market. Investment managers could measure with accuracy the input from the sales teams and better plan which products to enter a new market with, while also establishing economies of scale by having all client data in one place. This would allow ease of access, a quicker decision-making process, and a single format that works globally.

The ability to carry out future trend analysis confidently through all distribution channels would give investment managers the ability to build their product strategy to meet the needs of an increasingly sophisticated audience, while at the same time addressing the evolving regulatory challenges around suitability and target market.
Several transfer agents and platforms have attempted to achieve this, but when they have tried to leverage such data from their competitors the response has not always been favourable. What the industry needs is an agnostic business that can sit in the middle of fund managers, distributors and transfer agents in a position to obtain the data globally from all channels, with the capability of turning this into an easy-to-use user interface that can be tailored to each client’s needs.

The distribution Holy Grail?


Calastone recognises these strategic distribution challenges that face the industry. It has become our mission to bring such transparency to the industry by extending our partner network.

Working with leading global distributors we are obtaining greater levels of data unobtainable to most companies. We are then packaging and tailoring this data into user interfaces which work for each client to help them manage their businesses more effectively. While delivering this at company level, it is also allowing us to build up market views in key global markets, which will aid investment managers and distributors in understanding where they stand compared to the market, from both a cross-border and domestic perspective.

This level of global transparency has the potential of offering the industry a game-changing product that levels the global playing field and would bring untold advantages to the investment management industry.
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