Private market funds are slowly but surely being sold to the mass affluent, which will drive these asset managers and their service providers to be a little bit more like their Ucits retail fund counterparts, according to Kai Braun, consulting partner and alternatives advisory leader at PWC in Luxembourg.
In a recent interview, Braun addressed what’s called the ‘retailisation’ of private market funds and what that means for the service providers that support them. Retailisation refers to making big-ticket investments traditionally only open to institutional investors somewhat more available to wealthy individuals.
Looking ahead to the coming year, “what the asset servicers have to prepare for is the sheer wave that’s coming in off the retail alternative, or the democratisation of the alternatives [segment], which is going to be a totally new ballgame,” Braun stated during the interview.
“That means that inherent closed ended funds, where the assets are illiquid, are going to be” increasingly sold “to people like you and me.”
Braun pointed to the transfer agent process for retail alternative funds, where “the TA is more like an Ucits-type TA and the systems are more like Ucits systems, for the mass affluent, so to speak. People working in the alternative space are not used to that. So new teams have to work together, have to collaborate, new systems have to collaborate, and clients--the asset managers that are opting for these types of products--need a bit of education as well, in order to make those things a success.”
“From a technological perspective, the next step after that would be, for me, the tokenisation of those types of shares, which again, require a different view on technology and IT, and which require even more education on everybody’s side,” both “fund admin and depository, but also the asset managers.”
Paperjam+Delano Finance asked how service providers can handle the challenges of the retail alternative market and tokenisation. Would that entail providers seeking more alliances?
Braun replied that “obviously, there are specific and dedicated players out there that will take care of the tokenisation part.” So most fund “administrators could handle that, because most of them do handle Ucits today already. Therefore, it’s more of a mix and match.”
“It sounds relatively easy. The devil is always in the detail, obviously. But it’s feasible. The volume is still very low there. And therefore it’s also feasible.”
“Where I see still the biggest risk is” in providing “quality on the sheer masses of volumes of existing business and still growing” segments, Braun said. “A lot of” capital “is still under commitment and, therefore, to be deployed, which needs to be delivered day by day and quarter by quarter. And that’s a big enough challenge.”
More from the interview with Kai Braun will be published in Delano’s alternative funds supplement, which will be released on Friday 18 November.
This article was published for the Paperjam+Delano Finance newsletter, the weekly source for financial news in Luxembourg. Subscribe using this link.