Along with a general pressure on margins, the regulatory demands on fund management are also increasing. It’s a business that thrives on investment skills, close customer relations as well as technical and legal expertise – and some banks and asset managers might struggle to excel in all areas.
But the good news is: You don’t need to do everything yourself. Gone are the times when every bank and asset manager would structure, set up and maintain their own funds with the required manpower, know-how and sufficiently deep pockets. Today, the need for ongoing and increased regulatory compliance in managing and distributing investment capabilities, as well as tighter margins on revenues combined with cost efficiency requirements, drive a growing demand for white label funds.
What is white labelling and what can it do for you?
Some services and skills are simply too costly to maintain in-house, and at times, quite frankly, much better sourced elsewhere. Outsourcing the production of specialized components is an efficiency-boosting strategy that we have witnessed in all business areas: Smart phones are assembled from many third-party pieces. Fashion brands combine unlabeled, prefabricated parts to create their distinctive look and feel.
Strategically, white label funds contribute to efficiency gains in managing discretionary portfolios, but they also retain revenues of advisory mandates and support growth by increasing market visibility.
And the same trend applies to asset management solutions. Banks and asset managers outsource their fund infrastructure management to so-called white label, or private label, specialists. This enables them to offer highly specialized and regionally compliant own-labelled funds. The benefit is that banks and asset managers can focus on their various strengths and strategic focus points – their unique investment and customer relations expertise – while outsourcing increasingly complex technical and legal know-how. In so doing, they reap three benefits at the same time: Strategically, white label funds contribute to efficiency gains in managing discretionary portfolios, but they also retain revenues of advisory mandates and support growth by increasing market visibility.
Some added values with white label funds
+ Distribution: Increased market visibility via your own-labelled funds and simplified distribution of your portfolio management / asset allocation expertise
+ Cost efficiency: Lowering your overall fixed cost base, economies of scale in portfolio management and improved operational efficiency in back office tasks
+ Transparency and governance: Regulated product with annual audited report and full cost transparency
+ Focus on core competences: More resources available for client interaction and portfolio management activities
Fund infrastructure: Make or buy?
One of the fundamental questions the asset management industry faces is whether to make or to buy. Considering the costs and benefits, is it economically viable to take on the arduous process of launching and running your own fund? Is the necessary know-how available in-house and how much of the resources and budget will it use? Can you reach the investment volume needed in order to pay all the sunk costs needed to run your own fund structures?
The role of the white label provider can be compared to that of a general coordinator who acts as main contractor, supervises all subcontractors, takes care of regulatory requirements, accounting duties and project management along the life cycle of your fund solution.
The strict regulations, varying according to country and distribution channel, as well as the complex, time-consuming process of setting up a new fund have added to rising costs and greater efficiency is certainly called for. While searching for alternatives, even institutions that have so far managed without their own fund are starting to limit the number of third-party funds on offer. In addition, small and medium banks are realigning their portfolio to include fewer products and cooperation partners than in previous years.
Shift towards long-term white labelling partners
The alternative lies in white labelling solutions which include fund infrastructure and services provided by an asset management specialist with a proven track record and commitment to the business. You can offer your customers state-of-the-art fund products and services under your own brand with less effort and at a lower cost. The first to profit from this made-to-measure arrangement are your investors. They still enjoy flexible and personal customer service – customer interaction and distribution are generally not part of the outsourcing package and remain in-house – while also benefitting from the fund management expertise of a reputable financial institution.
The rationale is compelling and hard to argue with. But asset management is also a matter of trust, and building a long-term strategic relationship with a responsible white labelling partner might well prove the key to your success. In this respect, the role of the white label provider can be compared to that of a general coordinator who acts as main contractor, supervises all subcontractors, takes care of the regulatory requirements and the accounting duties as well as ensures the project management along the life cycle of your fund solution.
Suppliers of turnkey white label solutions who commit themselves to the “one-stop shop” concept generally offer a wide range of services for a variety of investment products. The fund structures are adjusted to the jurisdiction of the countries of domicile as well as the target markets. In addition to the regulatory fine-tuning for each country in which the fund is to be approved for distribution, this includes lean fund management and administration together with trading and the provision of marketing and sales tools.
White label solutions have prevailed in many industries. In the fund business, they are a serious alternative worth considering.
Turnkey solutions cover all services in the area of risk management, compliance and governance as well as project management for complete fund ranges. The delegation of the entire administration and reporting, which includes fact sheets, brochures and marketing reports as well as statutory reporting to investors, supervisory and tax authorities, is also often included in a holistic white labelling package.
Modular solutions for specific needs
It is helpful to think of all products and services as being part of a modular construction kit. They can be booked as a whole and also provided individually. To come back to that fundamental question of making or buying, only what is desired and needed should be outsourced. And the specific needs vary for each asset manager or financial institution. The trusted white label partner in his general contractor role will be able to advise on the right bundling of resources, oversee the onboarding and be responsible for the successful execution – while remaining discretely in the background.
For banks, insurance companies, asset managers, pension funds, family offices and other institutional investors, the benefits of outsourcing are obvious. They can focus on their own core competencies – maintaining customer relationships and sales – and benefit from the extensive know-how and optimized processes of their white-labelling partner. White label solutions have prevailed in many industries. In the fund business, they are a serious alternative worth considering.
Marc Reto Fischer is Director Business Development White Labelling Solutions at UBS Fund Management Services
Hubert Zeller is Global Head Business Development White Labelling Solutions at UBS Fund Management Services