The decision to create bespoke funds

To what extent should asset managers tailor products to individual investor needs?

In both good times, when inflows are plentiful, and in the not so good times, when assets are harder to raise, there is a temptation for asset managers to bend over backwards to meet individual investor demands in order to secure new money for their funds.

Over time, this can lead to the evolution of a bespoke, complex, hard to manage fund range, increasing operational risk and decreasing the manager’s ability to create both internal and external efficiencies. The creation of bespoke funds also decreases the opportunity to ‘pool’ investors into funds, leading to the creation of a number of smaller funds which may individually not be economically viable.

Whilst some investors with large mandates will always be likely to dictate their terms, both asset managers and investors can benefit from less customisation of fund ranges. If the decision to launch a bespoke fund is taken, asset managers should at least ensure they fully understand the impact on both profitability and on operations. But in some cases, counter-intuitive though it may be, asset managers may positively impact their long-term success by turning away new money.

Note: This opinion piece was first published by Knadel Limited prior to acquisition by Catalyst Development Limited

About the author

Dan Sharp

Managing consultant

I specialise in operating model and outsourcing projects, and have worked on many projects covering the whole outsourcing lifecycle including developing sourcing strategy, supplier selection, deal negotiation, implementation and supplier management.