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Achieving scalability for alternatives requires rethinking ManCos’ operating models

Large-scale ManCo Survey 2021 - Press release

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KPMG Luxembourg today announced the release of the “Large-scale Management Company Survey 2021”. In this 1st edition, the survey’s ambition is to get a clear understanding of the driving forces shaping the Luxembourgish asset management market by analyzing the key characteristics of the operating models of 18 of the 20 largest ManCos out of a population of over 300 ManCos (UCITS and/or AIFM) located in Luxembourg comprising up to 57% of assets under management. 

Alan Picone, Asset Management Risk and Regulatory Leader at KPMG Luxembourg comments the findings of the survey: 

In an increasingly complex market environment, asset managers have shown true resilience with the development of agile operating models. This agility has enabled scalability and operational effectiveness of the UCITS model, however, such a high degree of scalability has not yet been applied to alternative investment strategies. It’s time now that ManCos start to develop a targeted strategy for alternatives – in particular in the onboarding phases of new strategies based on robust governance structures, sound process workflows and the recruitment of highly-skilled professionals in core substance functions.

KEY FINDINGS:

Achieving scalability for alternatives requires rethinking operating models

Eighty-seven percent of ManCos do not see alternatives as a “new” area of strategic priority. For most ManCos, the expansion into alternatives is instead a continued reflection on a process set in motion some years before. 

Although AIFs only account for 9 percent of total AuM and 15 percent of total sub-funds, they add significant complexity to ManCo business models due to the nature and variety of alternative strategies. Therefore, to achieve scalability when integrating alternatives into the product portfolio, ManCo operating models require a targeted strategy.

ESG is the leading strategic priority for the coming years

Refining the value proposition of asset managers remains a top priority for most ManCos to attract clients and increase profitability.

In this context, integrating environmental, social and corporate governance (ESG) standards into their product offering and corporate culture represents the biggest strategic challenge — but also the biggest opportunity — for most ManCos. Concretely, 60 percent of ManCos consider ESG as their top strategic priority for the years to come.

The dawn of the asset management data revolution

While ManCos are increasingly embracing technology for governance processes and delegate oversight, there’s a general lack of technical solutions in their day-to-day management decision process. Only one respondent ranked adopting a digital solution as a key strategic priority, and only a third of our respondents considered it a top-three priority.

When it comes to technological adoption, add-ons that aid the oversight of delegates are the most common, especially those applied to distributors. This is largely driven by the sheer volume of distribution arrangements to oversee. Our survey suggests the use of technology delivers significant efficiency gains as, on average, one FTE can oversee 98 percent more contracts by using dedicated oversight tools.

For more findings, please read our dedicated page here.

© 2021 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.

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