04Mar2024
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Navigating the New Paradigm in Investment Fund Distribution: A Call for Collaboration and Innovation

Disclaimer: The views and opinions expressed in the vapa Swiss independent wealth management blog posts featured on this page are solely my own and do not necessarily represent the views of any institutions or organisations I may be associated with. These posts are intended to share personal insights and perspectives and should not be interpreted as official statements or positions of any affiliated entities.

In the evolving investment world, the retrocession model for fund distribution, previously widely adopted, has been considerably curbed due to numerous discouraging measures. This change was implemented with the interest of investment fund investors at heart.

Consequently, a notable growth in banks’ proprietary funds has been observed, occasionally due to leveraging in-house advantages like a higher lending value. In some instances, particularly for the so-called NTIP, the lending value for externally managed funds has been completely abolished. This strategic move has seemingly allowed banks to offset the previous retrocession revenues more effectively.

Smaller independent fund managers certainly have the paid opportunity to engage with specific banking platforms. Nevertheless, they often face a significant challenge. Even though they have made the financial commitment, they typically do not secure a position on the coveted internal recommendation lists.

Embracing Alternative Investments in an Era of Scarcity

As I ponder the current state of affairs, I believe that in the face of scarcity of true investment specialists, the growing culture of sharing and collaboration might nurture the development of a fresh approach. Even though equity funds are enjoying a good “run” at present, the appeal of alternative investments is on the rise among HWNIs/UHWNIs. They seem more willing to accept some illiquidity in exchange for performance not tied to traditional asset classes.

For smaller private banks, this situation presents three viable solutions:

  • Conduct a desperate and exhaustive search for specialists with the right expertise—an endeavour that doesn’t come cheap, given the reluctance of clients to pay higher fees.
  • Succumb to the convincing pitches of US business developers in the alternative investment space and buy their funds—a situation where the client pays the costs, the fund manager reaps the benefits. Still, the bank fails to earn any profit.

Alternatively, there’s a third option—an approach that encourages a more synergistic relationship between all parties.

Source: LinkedIn

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Evolution of investment fund distribution: Exploring collaboration and innovation in the new paradigm.

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