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How can investment managers use ICAVs to maximise geographic distribution?

, Patrick Waters

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How can investment managers use ICAVs to maximise geographic distribution?

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Patrick Waters, Director US Business Development at AMX, looks at how the Irish Collective Asset-management Vehicle (ICAV), is growing in popularity with institutional managers and investors on both sides of the Atlantic. 

 

A recent beneficiary is Versor Investments, a US hedge fund manager. Versor manages a merger arbitrage strategy and is now operating this within an Irish domiciled fund, on the AMX platform, that serves both US and European investors.

 

The Irish government introduced the ICAV in 2015 with the express aim of strengthening Ireland’s position as a global centre for investment funds. Since then this versatile pooled vehicle has proven increasingly popular with European, and more recently US investment managers, for its efficient management structure, and strong governance provided by the Central Bank of Ireland.

 

Non-US managers looking to connect with US investors have long faced difficult choices in terms of the optimum fund structure to use, as well as what level of local US presence is needed to properly operate and distribute such products. Many find it too expensive to run the multiple fund structures needed to best suit different investor types. As a result these managers may either avoid launching a US pooled vehicle (and potentially miss out on opportunities), or would opt for a US mutual fund wrapper that capably delivered economies of scale. However, this is not necessarily the most cost-efficient solution for tax-exempt investors, due to the cost of regulatory protections needed for retail investors.

 

US managers, particularly hedge funds, can face similar problems when looking to expand their investor base internationally. In addition to the overall cost (and complexity) of distributing across various jurisdictions, institutional investors outside of the US are increasingly more discriminating regarding the domicile and regulator involved in the operation of any pooled vehicle being considered. In order to compete for these client allocations managers operating funds out of BVI or the Caymans are increasingly facing choices about relocation of domicile, or the launch of a parallel structure within a second jurisdiction that better satisfies these evolving investor preferences (such as Ireland or Luxembourg).  ICAVs, when set up accordingly, can enable managers to gather assets from institutional clients in both the US and Europe, as well as many other jurisdictions, into a single purpose-built pooled structure.
 

Faster routes to global markets at lower cost

 

Here at AMX we have made good use of the ICAV to offer many of our clients increased fund flexibility, greater distribution and asset gathering potential, and lower management costs. By providing purpose-built funds that operate across multiple jurisdictions, we have helped them expand their investor profile. One of the most recent beneficiaries is Versor Investments, a US hedge fund manager. Versor is now operating an Irish domiciled fund on our platform that serves both US and European investors.

 

A bonus of using AMX’s platform is increased visibility across a global client base of institutional investors. Effectively it removes the need for both managers and investors to spend time researching fund structures and to focus on the strategies that deliver their investment objectives. ICAVs help break down barriers between markets while making investing in selected strategies more efficient because they can gather global assets in a single fund structure.

“AMX enables us to focus on our core business of generating alpha, as we leverage their broad infrastructure and geographic reach for our clients. Since partnering with AMX several years ago, we have seen substantial growth on our platform from European clients, and with recent regulatory approvals in the US, the ICAV structure is now an increasingly appealing option for some of our US clients.”

Saving cost and resources through scale
 

Like many of the asset managers on our platform, Versor benefits from the fact that AMX establishes the fund structure, runs the management company function and provides additional levels of oversight. This leaves the manager free to run the portfolio and build their direct relationship with their clients. As DeWayne Louis, Founding Partner at Versor Investments puts it: “AMX enables us to focus on our core business of generating alpha, as we leverage their broad infrastructure and geographic reach for our clients. Since partnering with AMX several years ago, we have seen substantial growth on our platform from European clients, and with recent regulatory approvals in the US, the ICAV structure is now an increasingly appealing option for some of our US clients. We are very enthusiastic about our AMX partnership and the new access it provides investors to our global merger arbitrage strategy.”

 

As well as providing managers with this new, more efficient route to markets, AMX provides various additional services that can accelerate the process of building scale with fewer resources. These include regulatory clearance, streamlined documentation, and efficient client onboarding. At the same time, we provide them with direct access to prime brokers through our platform. Find out more about AMX fund structures.

 

If you manage or invest in hedge funds, fixed income funds or long-only equity funds that don’t require full tax transparency, talk to us about whether the ICAV is suitable for you and your clients.

 

Photo credit: Mondli Khumalo


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