Mutualising fund due diligence efficiencies: the benefits of sharing
Asking a question clearly, with a single voice, will elicit a clearer answer
Everyone has too much work to do. If you’re in fund compliance, do you spend more time on due diligence questionnaires for your largest bank distributors, or on tens or even hundreds of smaller distributors where your relationship may be more sporadic? If you’re a distributor with not enough hours in the day, do you respond to the biggest global investment managers first and hope the smaller ones don’t hassle you for missing their impossible deadlines?
At ume, we have spent a lot of time looking at how we can reduce the expense and effort spent by asset management companies attempting to update their understanding of each distributor. We’ve also looked at how to reduce the typical delay in obtaining distributor responses from anything up to nine months almost to real time.
The answer seems simple, as the growing list of asset manager clients for the ume platform demonstrates. If distributor questionnaires are harmonised using a single platform, distributors will find them easier to complete and return. Creating this efficiency to the advantage of everyone involved is good for both asset manager and distributor – and especially for heads of compliance.
Everyone benefits if the fund industry as a whole asks a single set of questions, particularly as asset managers tend to use the same distributors. Eliminating mechanical repetition is a big incentive for distributors to update their information more regularly and completely.
A simpler process can eliminate the problem of outstanding questionnaires. Standardisation also negates unintended bias as all distributors can be compared on the same basis through ume’s automated risk evaluation tool. Distributors can therefore be assessed on a continuous basis and compared in a consistent way.
Deploying ume’s automated due diligence questionnaire process is a win-win for everyone. Distributors update when they need to, when an investment manager asks follow-up questions that prompts a revision to their answers, or from a regular prompt at least every 12 months.
Because the distributors are required to complete only a single questionnaire, customised for their organisational requirements, investment managers will get higher quality and more timely data, since updated information is available to every investment manager the distributor works with.
We eliminate the volume of questionnaires that distributors are required to handle, from possible hundreds to one, and reduce the likelihood of the smallest niche fund firms finding their responses are the distributor’s lowest priority.
Mutualisation of efficiencies is not about gaining a competitive advantage, but about everyone doing an essential task well. The ume platform represents a new business model, connecting not just organisations, but people, resources and knowledge, creating value and making it easy to exchange.
It’s scalable, eliminates friction and creates beneficial feedback loops for our clients in the investment community and improves the quality of data. Our ‘collaborate to compete’ approach has made us the largest fund distributor due diligence ecosystem. Saving time and cost on compliance while ensuring better quality enables our investment manager clients and their distributors to focus on their central roles in the asset management industry.
If you’d like to know how to obtain more time to spend on the important stuff, please get in touch.