A decade ago, asset managers could rely on building their own distribution channels to reach a wide range of investors. To do this, their fundraising strategies relied heavily on selling their performance and track record, as well as maintaining relationships with third-party marketers.
The fund distribution industry has become increasingly complex due to various regulatory requirements, such as
taxonomy, cross-border distribution MiFID II, IDD, ESG, PRIIPS, AML, KYC and many more abbreviations! For instance, asset owners who seek to buy or distribute third-party funds on behalf of their clients are not only now required to navigate through different regulatory conditions when dealing with multiple types of asset managers, but they are also faced with numerous commercial and regulatory conditions that vary between end investor category and type. As a result, this creates a significant administrative burden for all parties, without offering any added value.
To enhance fundraising and business development strategies in today's complex environment, fund managers should consider the following:
Embrace technology: technology can help streamline the distribution process, improve client engagement, reduce administrative burden and costs and increase efficiency. This includes using digital platforms for investor onboarding, automated reporting and compliance checks, as well as leveraging artificial intelligence and machine learning to analyze client data and personalize offerings.
Collaboration: fund managers can collaborate with other firms in the industry to share distribution costs and expand their reach. Collaboration can also help stay up to date with regulatory changes and industry best practices and enhance credibility. Building strong relationships with key intermediaries and gatekeepers is crucial for successful distribution.
Building trust: with investors and intermediaries can be achieved by providing transparent and consistent communication, being responsive to their needs, and adding value beyond regular updates on performance and strategy. By building trust with investors, you can create loyal investors who will help you expand your distribution reach.
Personalization: fund managers should aim to provide personalized services to their clients. By understanding their client's needs and preferences, fund managers can tailor their distribution strategies and offer value-added services that meet specific investment and operational requirements.
Targeted and customised funds through platforms: with the number of new investment products, ETFs in particular, providing similar investment features and returns at much smaller costs, investment fund managers need to create a product offer that matches investors’ needs and demand and makes distribution more efficient and less costly.
Data-driven approach: fund managers should use data analytics to gain insights into their overall distribution strategies. Gather and analyze data on investors' preferences, behaviour, and needs to tailor your distribution strategies. Use this information to refine distribution strategies, create personalized investment products, and optimize their distribution channels.
Differentiated offering: in a crowded market, asset managers need to differentiate their offerings to stand out. This can be achieved by developing unique products or services, focusing on a specific niche or investment theme, or offering superior customer service
Embrace ESG: with the increasing demand for sustainable investments, integrating ESG considerations into your distribution strategies can be a key differentiator. Develop ESG-focused products and marketing materials, and partner with ESG distribution platforms to reach like-minded investors.
Streamline distribution agreements: by targeting customised funds through platforms, fund managers could streamline their distribution agreements to reduce administrative burdens for both parties. Fund platforms work with many asset owners, providing economies of scale through the volume of contracts they manage. These platforms allow fund managers to access all types of investors, either through intermediaries or directly. Fund managers can choose to sign a single contract with the platform to access the network of carefully selected investors and fund distributors that match their fund's profile.
Stay compliant: the regulatory landscape is constantly evolving, and staying up to date with regulatory requirements is essential for successful distribution. This includes adhering to regulations around MiFID II, IDD, AML, and KYC, as well as understanding the impact of emerging regulations such as PRIIPs and ESG reporting on the investors' investment process and decisions.
The increasingly stringent regulatory environment and digitalisation will continue to have a profound impact on distribution strategies to provide easy solutions to meet existing and new regulations and manage the immense volume of data to be processed. Several processes are now intermediated by specialised fund distribution platforms that offer to consolidate processes through outsourcing, digitisation, automation and standardisation. They thus create an ecosystem that allows fund managers to distribute their funds often with a one-stop solution that includes enhanced fund distribution, data solutions and customised solutions.
Overall, to win at distribution strategies, fund managers must be nimble and adapt to the changing landscape. By adopting new technologies, collaborating with industry peers, and providing personalized services, asset managers can improve their distribution strategies and attract more investors.