Welcome to a new series from Hawksmoor Partners where we sit down for a coffee with clients, friends and partners of the firm for a discussion on key issues close to the global fund management industry. This month we sampled a beverage with Attilio Veneziano, founder of Veneziano & Partners.
Hailing from Italy, Attilio is now based in the US where he advises fund managers on their passporting options as they approach the European market.
What were you setting out to do when you launched Veneziano & Partners?
We wanted to create a one stop-shop solution for US fund managers and help them to strategically position their fund strategies and products in Europe. In this sense we are a ‘niche in the niche’ firm, because we have been working successfully for many years and are specialized in assisting US fund managers interested in European distribution. We operate as a hybrid practice. Some of our services, like marketing authorizations of funds, are typically offered by law firms as well. What sets us apart from the rest is that we also operate as consultants and we help US fund managers to gain a commercial insight about Europe for their strategies.
Why do you think fund managers should look at Europe as a source of investment?
There are still countries in southern Europe where, despite the appearances, the local population is very rich in terms of savings. These are very good places to distribute good products for retail investors, however it is a requirement that a solid distribution network is put in place. Generally, Europe is also very new to private debt capital markets and this is an area where specialized managers could find that there are more opportunities. Compared to the US, for instance, Europe has not experienced major fraud cases in the investment funds ecosystem and whilst public pension funds are very selective, they are still looking at diversification for their portfolios.
In your view, what are the greatest challenges facing fund managers seeking to distribute their products in Europe?
With AIFMD there has been a definitive switch from casual to formal and I would also say complex on many angles, distribution being one of them. Fund management and distribution have become very expensive endeavours and require a significant commitment of resources in terms of time and capital to yield results. It is not for everyone. The challenge is in the regulation and the compliance burden, of course. Let’s take reverse solicitation under AIFMD, used by many for a while as a marketing strategy in order to avoid compliance with AIFMD or any of its parts. This is a short lived approach, not because of the legal and regulatory risk, but the reputational risk. Sticky money doesn’t invest in the funds of managers who have not committed seriously to a jurisdiction, starting from general compliance with AIFMD up to the marketing authorizations. Regulation is not necessarily bad after all. The Capital Markets Union, with the ELTIF regulation for instance, has offered the opportunity to smart fund managers to reinvent part of their offerings into new products.
What is World Gondola, and what does it offer fund managers around the world?
World Gondola is a digital repository of rules on marketing, sales and distribution of investment funds in Europe and abroad. The concept is not new, but the angle is completely different from previous offerings. We want to empower fund managers, by providing them with actionable intelligence and the support of our global network, but also by giving them the opportunity to learn
how to carry out some of the tasks themselves. We have developed a learning center section with videos that aim at giving a full picture of the regulation, the forms for the marketing notifications and general do’s and don’ts. Whilst we don’t expect that the do it yourself approach is for everyone, we believe that knowledge is power and knowing helps fund managers in the outsourcing of the various tasks. Too many times we have seen a critical outsourcing to law firms that have resulted in some expensive mistakes.
What would you say is the one thing most non-EU fund managers do wrong when they approach European fund distribution for the first time?
Typically they lack commitment to the various EU jurisdictions and the investors they want to approach therein. There is a misconception that travelling to Europe every six to eight weeks or attending big conferences in Europe per se is the way to build a distribution network. The same goes for hiring as their European distribution specialist any European that is local to them and might have had any experience in Europe. There is no one solution fits all, however we have seen that successful managers are the ones who have committed time, capital and resources to build a distribution network in Europe and have done so with a combination of third party marketers, distribution chains and their own boots on the ground. Public relations are of utmost importance too especially when a firm is new to a market and is one of the boxes to tick when defining the strategy for any given market in Europe.
To learn more about World Gondola, visit www.worldgondola.com