WAYSTONE From pole to pole: Super ManCo

FROM POLE TO POLE

SUPER MANCO WAYSTONE OFFERS GLOBAL SUPPORT

Until five years ago, there were still some perceived benefits for firms to build an in-house management company (ManCo), in terms of control and the assumption that using a third party might be perceived differently by investors. But with these concerns largely allayed, the rise of the third-party ManCo – and, indeed, what has been termed the ‘Super ManCo’, a firm that supports both UCITS and AIFs – seems assured.

Waystone may have only officially launched in March 2021, but the merger of three companies – DMS, MontLake, and MDO – under one banner has brought together experience plus geographical and asset coverage to create a Super ManCo that offers scale, substance, and expertise to its clients. Operating principally in Luxembourg and Ireland, Waystone also has a Cayman Islands operation, has passported its ManCo into France and Spain and has a UK ACD, its equivalent of a ManCo.

David Morrissey, Global Head of Client Solutions at Waystone, says: “When you look at the scale and substance at each of the management companies, together with our value-added services, it really is a significant differentiator in the market.”

Key services offered by third-party providers revolve principally around the six key management functions required by legislation, for either UCITS or AIFMD investment products, with supervision of delegates, operational risk management, and investment management oversight at their core.

“We tell our clients they should really view us as an extension of their own internal teams, rather than the firm having to consider and worry about scaling up and allocating resources to the business”, Morrissey says.”

A third-party ManCo must also act agnostically in different jurisdictions to truly support service its clients. “We want to help our clients raise assets in their core markets,” Morrissey says. “Whether they need a Luxembourg fund, an Irish fund, a Spanish fund or a French fund, we offer them the regulatory support that allows them to launch a fund, which in turn, allows them to raise assets.”

Waystone is currently seeing client preference for Luxembourg over Ireland for private debt and illiquid asserts, as Luxembourg has built up a brand awareness and expertise that Ireland has not yet achieved, though Morrissey believes that the regulatory framework and market support will evolve.

He says: “Luxembourg has the SCSP which is a GP-LP investment structure. Earlier this year Ireland launched the Irish Limited Partnership (ILP Structure), which has been an initiative of the Irish Funds Industry for over 10 years, but unfortunately it hasn’t gained the market traction that the Irish industry would like to see at this stage.”

Ultimately we’re focused on helping our clients succeed “ “

DAVID MORRISSEY GLOBAL HEAD OF CLIENT SOLUTIONS

Waystone is well-placed for any development of jurisdictions and instruments in which its clients have an interest, with recent client requests including support in the Cayman Islands, the US and Japan.

“We are in the process of rolling out the equivalent of a ManCo in Singapore to support our clients, whilst we also passported our management company to Japan to assist one of our clients raise assets and distribute their funds locally. Ultimately we’re focused on helping our clients succeed,” Morrissey says.

DAVID MORRISSEY

GLOBAL HEAD OF CLIENT SOLUTIONS

David Morrissey is Global Head of Client Solutions at Waystone and is based in Dublin. David has over 25 years of experience in product development and client service covering mutual funds, UCITS and non-UCITS, offshore hedge funds and private equity funds in the US, Europe, the Middle East and Asia. At Waystone, David uses his vast experience to assist clients with structuring and developing products in their chosen market. Leading a global Client Solutions Team, David has product expertise in key jurisdictions that include,the Cayman Islands, Europe, the USand the Asia-Pacific region.

LEADING THE PACK

LUXEMBOURG EXTENDS ITS REPUTATION AS A THOUGHT LEADER

The Association of the Luxembourg Fund Industry (ALFI), the industry body for promoting Luxembourg’s fund sector internationally, has witnessed the establishment and growth of ManCos across many years.

THE HISTORY OF MANCOS

The fund industry grew primarily through the creation of self-managed UCITS fund entities. As funds proliferated and as the industry matured, the management company concept was born as an entity that would provide the necessary delegated services, governance and oversight in a more scalable way. The management company concept provided greater consistency and assurance of good governance and internal control.

Craig Blair, Managing Director and Conducting Officer at Franklin Templeton International Services and Co-Chair of the Management Company Technical Committee at ALFI, says: “This ability to be scalable allowed greater depth of expertise to develop in key areas such as portfolio management oversight, valuation and internal control functions such as risk management, compliance and internal audit. Bringing that skill and expertise together in a more efficient way meant you could develop greater value around good governance.”

The industry has since matured and seen greater development of regulations, particularly with the focus on topics such as liquidity, delegation oversight and more recently on sustainability. “This caused us to really think about how we structure ourselves, how to

You have to have requisite substance, control and decision making in the domicile that the management company is in Craig Blair, VP, General Manager “ “

have appropriate positions and substance in place, organisational requirements, and policies and procedures are defined to a much greater level than before,” Blair says.

INTERNAL OR EXTERNAL?

There are still compelling arguments for both inhouse and external ManCos for asset managers, depending on the firm. For example, the costs of market entry are quite high in terms of hiring the required substance and capital requirements, so firms need to consider the financial outlay and ROI if they set up their own structure.

Blair asks: “Is it a long-term committed strategy, or are you going in with more of a tactical approach with a limited number of products and therefore will the costs be too prohibitive? Then you’d possibly be thinking about that third party model, perhaps even as a transitionary arrangement for the first three to five years until you gain critical mass.”

Even existing firms in the market entering new asset classes or areas of investment may want to consider whether they build organically or whether they utilise a third party who have experience already in those asset classes.

In terms of the internal management company, he flags risk appetite as a consideration for those asset managers who want to have their own structures. “You have to have requisite substance, control and decision making in the domicile that the management company is in, but the firm can leverage the infrastructure and global expertise to an extent within the wider organisation.”

DEVELOPING THOUGHT LEADERSHIP

To consider the optimisation of the ManCo market, ALFI set up the management company technical committee with working groups looking at issues including due diligence on ManCos and service providers, marketing and distribution, and ESG and EU SFDR requirements.

“We’re also developing an investment management oversight forum,” Blair says. “Investment management oversight is a key requirement, but I don’t think there’s been enough of a broad-based industry discussion about best practices. We’re trying to produce some practicable guidance around that.”

He concludes: “In Luxembourg, the industry needs to continue to deliver value to investors, whilst ensuring the greater levels of investor protection. We are well placed to be a thought leader on topics such as digitalisation and sustainability.”

CRAIG BLAIR

MANAGING DIRECTOR AND CONDUCTING OFFICER AT FRANKLIN TEMPLETON INTERNATIONAL SERVICES AND CO-CHAIR OF THE MANAGEMENT COMPANY TECHNICAL COMMITTEE AT ALFI

Craig Blair is General Manager, Conducting Officer, and Board Member of Franklin Templeton International Services S.à.r.l. Blair has worked in the global financial services industry for over 16 years, holding various responsibilities in the Luxembourg, UK, Irish, Eastern European and Brazilian asset management industries. As Head of FTIS, he is responsible for the day-to-day operations of the corporate entity and EU-wide branch structure. He currently also sits on the Board of ALFI and co-chairs the ALFI Management Company Technical Committee.