Author: Avanterra – avanterra.com

The Model T revolutionised the automobile industry.

Launched in 1908 by Henry Ford, by 1918 half of the cars in the US were Model Ts.  With over 15 million sold, it held the record for the most sold car in the world until 1972 when it was finally overtaken by the VW Beetle.  The reasons for the Model Ts success lay in its innovative design and its cost, and the key to its cost was how it was produced, for the Model T was the first mass produced assembly line automobile, with cars coming off the line every three minutes.

Whilst we’re not saying that asset managers should launch a fund every three minutes, we are saying that there is a lesson to be learnt.

That there needs to be a production process for the creation, launch and management of funds over their entire lifecycle is, at first glance not as obvious as the need for a production process for a car.  With funds, there is no solid, physical object at the end of an assembly line.  Instead, a sequence of ideas, processes and events come together to make a final, intangible product, a fund.  This intangible product must, however, be fully formed and operationally ready to receive investments, manage assets, be registered for distribution, comply with regulations, have counterparties appointed, contracts signed and delegated functions and relationships set up.  Approvals and authorisations must be applied for and given.  Obligations to investors and regulators must be understood and documented, and reporting procedures set up and ready to roll.  Events over a fund’s lifetime, such as new share classes, investment strategy changes, merging and closing, and responding to new legislation must also be anticipated and catered for.

Creating, launching and managing funds is a very complex process.  It stretches across different functions with many responsibilities being delegated to third parties however it still needs to be viewed as a single overarching process in order to manage it efficiently, effectively and quickly.  If you can get this process right and if you can maximise efficiency, you stand to gain a huge competitive advantage.

The asset management assembly line

So, how do you do it?  The first step to understanding a complex process is to analyse it and, before Ford set his assembly line in motion he analysed every aspect of the process of production.  He mapped the steps and skills needed into 84 areas which were linked by a moving conveyer belt.  The same concept of the assembly line applies to the production, launch and management of funds but instead of a conveyor belt, this process is driven by technology, industry knowledge and robust business procedures.

The ideation stage

The assembly line for a fund begins with an idea.  In some cases, this idea comes from product development, sometimes from portfolio managers, sometimes the sales team identifies a gap in the market or hears demand from clients.  No matter its origin, the idea must be assessed, model portfolios built, and markets explored.  This ideation stage typically sits with the product development team who expound the idea of a fund and assess its likelihood to succeed.  Some funds never make it any further than this but those that do must then be translated into a legal framework.  The information and skills to do this lies in legal teams or with external lawyers and the complete idea must be transferred from product development to the legal team without losing any information or introducing errors.

The regulatory approval, authorisation and registration stage

Then comes the process of regulatory approval, authorisation and registration.  The skills to do this are often in legal or legal adjacent teams or in external service providers such as law firms or auditors and again all information must be transferred completely and without error.

The fund launch stage

Once approval has been gained, the fund moves to the next stage – the launch, which again involves moving information between teams and organisations accurately and completely.  The fund must be set up in portfolio management systems, fund accounting systems, transfer agency and distribution systems.  Again, information must be transferred and, sometimes information must be changed and fed back along with additional data, to the other teams.  Distribution processes must be established.  Regulatory reporting and disclosures must be understood and monitored for changing requirements.

These are some of the steps, each complex in its own right, in the assembly line for a fund and they are all part of one overarching process that must be followed to get a fund to market.  Connecting these processes and ensuring that information is captured at the point of creation and is transferred accurately and quickly to the next stage, is the challenge.  This is where most time is lost, delays are introduced and errors are made.  With turbulent markets, rising costs, falling revenues and ever changing, increasingly complex reporting burdens, now really is the time for the asset management industry to have its Model T moment and to start treating funds as products.  Companies that do, will be streets ahead of the competition.

Today’s leading asset managers are all familiar with the concept of the Investment Book of Records and tomorrow’s leading asset managers with be just as familiar with the Product Book of Records – the technological conveyor belt that will support them as they manage their funds, their products, over their entire life cycle from creation to retirement.  To meet the challenges of tomorrow, asset managers must embrace this concept of product lifecycle management for funds and give the product functions within their organisations the support they need by allocating the right resources paired with the right technology.

Kate Loretto is Head of Communications and Marketing at Avanterra where she is responsible for all aspects of brand, communication and marketing.  Over the course of her career Kate has managed fund performance teams, set up the data and reporting function for asset managers operating in the complex European cross-border market and worked as an investment writer, before moving into senior roles in marketing and communication.  Before joining Avanterra Kate worked at Waystone, MDO Management Company, The Directors’ Office and Schroders.