The CSSF in Luxembourg produced Circular 18/698 in 2018 to provide guidance to investment management firms that were delegating investment activities...
Why ManCos are Booming
A rise in outsourcing, increasing regulatory scrutiny and demands for investment specialists are driving the ManCo sector growth. Great news for ManCo's that Dasseti's flexible compliance and third party risk management platform makes it easier to maintain oversight and control over large numbers of third parties and complex investment landscapes.
Third-party management company (ManCo) services are a growth business. Many institutional investors are outsourcing more asset management functions and the size of the outsourced mandates is also increasing. This trend towards outsourcing is partially responsible for driving the growth of the ManCo sector.
There is a growing community of ManCos globally, with assets under management (AUM) of $12 trillion. The largest ManCo, BlackRock's iShares, has AUM of $1.9 trillion.
In 2021, ManCos in the United States managed a collective $6.3 trillion in assets, up from $4.6 trillion in 2016. This growth is expected to continue, with ManCos managing an estimated $8.8 trillion by 2025.
In Europe, the ManCo sector is expected to grow to around $2.6 trillion by 2025.
Luxembourg in particular has a thriving ManCo sector, with over 300 ManCos domiciled in the country, including 136 "Super" ManCos. The ManCo industry in Luxembourg has grown rapidly in recent years, driven by the same factors that are driving growth globally. The ManCo sector in Luxembourg is highly competitive, with a large number of providers offering a wide range of services. This competition is likely to continue to drive down prices and increase the quality of service.
Ireland too is expecting a rise in popularity of ManCos. Ireland has a well-established financial services sector and is already home to a number of large ManCos. The Irish ManCo sector is expected to grow significantly in the coming years, as investors look to take advantage of the country's low corporate tax rate and skilled workforce.
The Asia-Pacific region is also a growth market for ManCos is expected to grow to around $2.2 trillion by 2025.
What is driving the growth of the ManCo sector?
Alongside the move towards outsourcing, the growth of the ManCo sector is being driven by a number of factors:
- The regulatory environment is becoming more complex, and investors are increasingly outsourcing to specialists who can navigate this complexity.
- Investors are looking for more flexible and customized solutions, which ManCos can provide.
- Outsourcing to a ManCo can help investors reduce costs.
- The ManCo sector is also benefiting from the growth of passive investing. Passive funds are generally simpler and cheaper to run than active funds, making them an attractive proposition for ManCos.
What does the future hold for ManCos?
The growth of the ManCo sector is expected to continue in the years ahead. The factors that are driving growth are unlikely to abate, and the sector is well positioned to benefit from the continued growth of passive investing.
We expect the number of ManCos to continue to grow, and for the average size of ManCo to increase. Consolidation is likely to occur as the sector matures, with larger players acquiring smaller ones.
What are the implications of growth for the ManCo sector?
The growth of the ManCo sector has a number of implications for the asset management industry:
- Investors will have more choice when it comes to outsourcing their asset management.
- ManCos are likely to become increasingly specialized, offering a wider range of services and products.
- The growth of ManCos is likely to lead to consolidation in the asset management industry.
- The rise of ManCos is likely to put pressure on fees, as investors seek value for money.
ManCos are playing an increasingly important role in the asset management industry, and this is only set to grow in the years ahead.
What challenges face ManCos?
ManCos face similar challenges to the wider investment sector in increasing regulatory pressures, squeezed fees and greater competition. In addition, the growth of ManCo services has created new challenges such as succession planning, talent retention and managing client expectations.
As the ManCo industry grows and becomes more competitive, it is important for ManCos to differentiate themselves in the marketplace. One way to do this is to focus on providing value-added services that go beyond traditional asset management.
Services that can help ManCos to differentiate themselves include: investment research, performance measurement, risk management, tax planning and estate planning. In addition, ManCos can provide value-added services to their clients through technology platforms that offer transparency, data analysis and reporting capabilities.
How does Dasseti support ManCos?
Dasseti's flexible compliance and third party risk management platform makes it easier for ManCos to maintain oversight and control over large numbers of third parties. Custom reporting formats and analytics dashboards make it easy to demonstrate value back to clients quickly and with minimal effort.
Dasseti Collect is packed with features that remove the need for multiple platforms and systems, such as CRM, document and research management, findings and reviews plus others. By consolidating features into a single platform, Dasseti streamlines internal processes and reduces complexity across the investment technology stack.
Get in touch to find out more about Dasseti Collect works with ManCos to de-risk their business.