The use Fund Management Hosting Platforms is a popular and efficient solution for gaining access to the European markets, through a fully compliant Investment Management entity without the need for Funds to establish their own fund management company.
Hosted funds benefit from the efficiencies provided by the pre-existing structure of the hosting platform in terms of sharing costs, existing middle and back office operations, and speed to market. Hosting platforms are generally “umbrella” fund structures, which allow Funds to join the platform by creating individual sub-compartments or sub-funds, dedicated to their own investment strategies and independent management.
A hosted fund can elect one of the following outsourcing options with regards to portfolio investment management:
- Active Portfolio Management
Outsource portfolio management to the external manager entirely, with the AIFM becoming responsible for the execution of the investment policy of the fund and on a discretionary basis the decision-making regarding any investments of the fund.
- Delegated Portfolio Management
Delegation of the whole function of the Portfolio Management to a third-party management entity (i.e. the Fund) under a delegation agreement. The investment decisions are taken and executed by the third-party entity, but the AIFM is still responsible to ensure that the third-party strictly follows the investment guidelines as set in the Fund’s Offering Documents and the delegation agreement.
- Restricted Portfolio Management
Establishment of an Investment Committee of the Fund under specific charter and bylaws. The Committee is comprised of members which are relevant to the Investment Guidelines of the fund and members of the AIFM. The Committee handles the process leading to an investment, provides recommendations for investment and executes the investment decisions. The investment decision is taken by AIFM but it is restricted only to investments recommended by the Committee.
A fund management hosting platform can provide the following benefits:
- Sharing of fixed costs between platform users.
- Partnerships and better pricing with prime depositories, leading auditors and legal consultants, and other leading professional services firms.
- Remove the requirement for design, authorisation and set-up of a new structure, simply join an existing fund structure.
- Independent, stand-alone “identity” available for funds.
- Introduction of specialized services required for servicing the specific investment policies of every sub-fund.
- Outsourcing responsibility of the overall regulatory and compliance requirements of the funds, allowing the fund manager to focus on successful portfolio management.
- Qualification of the funds for EU distribution passporting.
- Provision of the level of involvement and assistance required in portfolio management or risk management – fund functions can be completely or partially outsourced or delegated back to the hosted fund if full control of all functions is required.