Main digital challenges facing ManCos
With more than 75% of UCITS funds distributed worldwide, Luxembourg has become a world leader in the cross-border distribution of investment funds. To this extent, new players have emerged: the so-called “ManCos“. These companies can market funds using the passport throughout the European Union. ManCos will thus offer asset managers a cost-effective solution for certain specialized processes such as alleviating the burden of the regulatory framework, overseeing legal and compliance needs, and overall portfolio management and valuation.
Among other things, ManCos will allow the asset manager to focus on alpha generation, through activities such as stock selection and in-depth sector and market analysis. This will further add value for investors.
The current situation of ManCos in Luxembourg
According to PwC Luxembourg ManCos Barometer 2021, the growth of AuM continues and intensifies with almost €4.158bn which translates into a 4% increase. Luxembourg continued to play a central role in international fund distribution. In December 2020, it hosted 314 UCITS and AIFM licensed ManCos, welcoming twelve new entrants.
While the number of ManCos and Super ManCos remained relatively stable, this was primarily due to the number and size of mergers and acquisitions (M&A) in the industry, making 2020 a year of growth and consolidation of assets under management.
This trend will likely continue to contribute to the strengthening and consolidation of the industry. This will almost certainly lead to the emergence of stronger players that can deploy more robust expertise, have the resources to respond to a challenging and resource-intensive regulatory environment, manage increasingly complex assets, and meet client demands and needs. In addition to this, 67% indicated that the country’s strong ecosystem with stakeholders and regulators creates political stability and a healthy business environment.
The challenges they face
However, according to the PWC ManCo 2022 survey, the main challenges facing the industry are the digital revolution. 35% of the organizations surveyed see this as an obstacle they need to be prepared for. This survey, therefore, raises the issue of digital tools as well as the cost that is involved.
Yet, ManCo leaders very often see digital tools as a way to process and manage their data, optimize their customer relationship management, while allowing them to oversee their activities from a centralized dashboard.
To better understand the impact of this, we must first take a closer look at the amount of budget allocated to their business and/or technology transformation journeys. The result is that only 28% of ManCos allocate between 100 and 500,000 euros. A cost that can therefore be expensive for the company itself.
Looking at most, if not all, investment management firms today, it is easy to see that they do most of their work manually with the support of some popular office tools like Microsoft Excel. Even those who use specific software products still perform a huge amount of work by hand. This is because the specific software handles a very specific task that is not synchronized with the rest of ManCo’s technical needs.
So, this leads us to look at ManCo’s technology needs from two main angles. First, there is the need for technology solutions that perform very specific tasks, calculations, modeling, visualization, reporting, etc. Second, and equally important, is the need to build an IT infrastructure that integrates all the separate tools. While the former brings its own benefits, it is the latter that can become the real game changer. However, each of these comes with its own set of challenges and shortcomings. Therefore, outsourced support can be a solution to having a solid risk management strategy.
In conclusion, the use of obsolete systems and staff with little or no skills to manage this transformation (data protection) can represent a significant risk for the company. RFA is a market player that can offer you the right training and tailor-made data management. Our mission is to help customers to adopt hybrid work (telework and office) while bringing you a new vision in the face of a digital skills deficit.