Master your strengths, outsource your weaknesses.
– Ryan Kahn
As an asset manager, what’s most important to your business? What’s right at the top of your list? I know what you’ll say. It’s your investment capability. It drives the revenues, the AUM, the organisation forward. But what about how that capability is delivered? Isn’t that just as critical?
Today, there can be no doubt that your delivery mechanism or vehicle, through which investors will access your capability, can be the difference between success and failure.
Whether it’s a fund, a structured security, a sub-advisory solution, a strategic partnership even, investor needs are greater than ever – cost efficiency, tax efficiency, capital efficiency, regulatory status, accounting consolidation treatment, ESG eligibility, access to regulatory reporting, the list goes on.
If a prospective client’s investment criteria are not fully met, you risk losing out on a meaningful relationship and valuable assets. And those criteria are never the same for any two investors. The list of requirements only gets longer when you distribute cross-border and into other regions.
But let’s not forget that from the manager’s own perspective, any product must also be deemed viable based on its operations, resource demands, cost and profitability.
Who owns your product?
So who then is in charge of ensuring your vehicle is fit for purpose and ticks all these boxes? Is it your legal team? Your COO? Your CFO? Do you rely on counsel, your manco, your administrator, your auditor to lead you through the entire project?
Throughout my career as a product leader, I’ve seen the process managed by each of these groups or individuals. Indeed, all have a vital role to play in bringing a product to life, but if we agree that the delivery vehicle is so critical to achieving the right outcome, shouldn’t product responsibilities be led by a product expert?
If you were pretty handy at DIY, would you think you could just apply your skills to build a house? That you could just take on a new construction project and deliver a state of the art property, on plan, on time, on budget, that will have happy residents for years to come?
We might dream of doing such things, pivoting, trying our hand at something new. We might even see others doing it and think, “Ah, it’s not so difficult.”, but the reality is it takes years of experience and training, often with mistakes along the way, to develop the skills that add value in a given profession.
The expression “Fake it ‘til you make it.” has no place in the product world and it’s a complex world to navigate. Get it wrong, and it can lead to reputational damage, cost wastage, and fractured client relationships. Get it right, and it can be a catalyst for growth and offer that all important competitive edge which places you one step ahead of the pack.
Seemingly minor considerations – choice of fund domicile, provision for withholding tax reclaims or certain regulatory reporting – can be critical and, if not accounted for properly, risk destroying client demand and potentially leading to funds being managed indefinitely for just a small number of investors or worse, those investors leaving altogether.
But we’re not just talking about firms that operate entirely without product resources. You may be a product owner yourself, working in a growth organisation with an increasing list of deliverables to build out the platform, to launch new funds, to form new vendor relationships, to support expansion into new territories, asset classes or client channels, but face resource constraints or experience gaps that cause you to question just how on earth you’ll handle it all.
What are your options?
Product is a valuable function in any fund management business, whether you’re a new start-up or a member of the trillion dollar club.
But when firms recognise a product skills or resource gap, the first instinct is to fill it at zero cost – by relying on the collective knowledge of other internal teams and service provider partners. But isn’t it just a false economy if again so much depends on adopting the right structure?
If that’s true, then it’s time to re-think how you might access product expertise or additional product resources.
Your first option is to hire in a product manager. But, of course, there’s not always a sufficient pipeline of products to justify a permanent hire. You may also be facing headcount or margin compression and the idea of committing to the cost, time and resources of building out a dedicated product team is just not viable.
So you might move on to the second option of bringing in external help. It shifts your cost model from fixed to variable (which is favourable to many), but if you don’t choose wisely, it can be more a hindrance than help, and multiply rather than mitigate your costs.
Many consider the appointment of a consulting firm. They’re often well-resourced, have global reach, provide access to valuable market data, offer a broad range of services. But that often comes with a hefty price tag, and whilst they might be able to deliver extensive advice and leverage sophisticated project tools, such firms are rarely in a position to then support implementation of your plans based on knowledge and experience as industry practitioners, operating as a natural extension of your business. Consultants advise – but you still need the infrastructure to deliver.
For that reason, firms might prefer to appoint product contractors. But that comes with its own challenges. With new tax rules (IR35) in the UK, for instance, contractors are largely treated as full employees today, with benefits, pension contributions, legal rights, which somewhat undermines the advantage of using them in a flexible workforce model. There’s also the lead time to find a suitable candidate with the desired skills set, along with the process to interview, onboard and integrate any new contractor within the business, not to mention key person risk with the appointment of a sole individual, offering no back-up or support.
So, what’s the answer?
Reframe Capital is a new product and investment solutions business that disrupts the existing model and offers a distinctive, new proposition – a fully flexible, B2B outsourced product and client solutions function.
We’re long-standing industry practitioners in business strategy, product and distribution with a demonstrated track record of building platforms and products globally, raising $billions in AUM for some of the world’s largest asset managers.
We have a proven ability to deliver tangible economies and material savings within platform growth projects, bringing a wealth of direct knowledge, expertise and connections across global markets, asset classes, investment structures and client segments.
From our many years of combined experience, we have acquired valuable data, know-how and intelligence which has direct application to your business, informing your future decisions.
Why then is it the answer?
Put simply, it builds upon the strengths of the consultant and product contractor models, whilst eliminating the weaknesses.
The Reframe Capital platform aligns with market trends. As investor demands and product requirements become increasingly complex, as firms face headcount and margin compression, we fulfil a specialist role in a cost-effective way, serving your business by enabling you to carefully manage your cost base, drive direct revenues and focus on generating value by deploying investor capital.
Unlike traditional consultants, we’re able to provide clear strategic direction, actionable advice and full execution of your business plans, as an extension of your leadership team. We can take on tactical short-term initiatives, research projects or a strategic product management role, shaping a service entirely around your business need.
Through our affiliate network, you have access to senior product experts, along with a broader set of consultants specialising in M&A advisory, technology, operations, asset allocation, project and business management, compliance, and sustainability, at a single, attractive price point. We provide valuable business resources as you need them, without the headaches, time commitment or expense to interview, select, hire and support permanent headcount or individual contractors.
Our outsourced service offering replaces fixed headcount costs with variable pricing structures which align with your budget, requirements and target outcomes.
But can you really outsource a product function?
Within private markets specifically, there’s a sustained trend towards outsourcing of certain non-core functions, from business and data management, to operations, trade execution, risk, compliance and reporting, even distribution.
Firms are able to play to their strengths, unlocking greater business value through their investment process, by partnering with specialist providers that offer strategic direction to grow their business, product, operations and distribution platforms, and in turn their revenues.
These providers, like Reframe Capital, bring transformative leadership experience, valuable industry knowledge and intelligence, a relationship network, and execution skills that can enable management teams to operate more efficiently, with greater agility and confidence, in bringing new investment capabilities to market, expanding into new territories, targeting new client groups, launching new product types.
But the business model is not one where managers have to give-up control of an initiative or accept only limited visibility with a project implementation. Instead of work passing outside the organisation, the provider steps in to reinforce your core team – more an insourcing than outsourcing, delivering to your specifications, under your direction, according to your vision and objectives.
An effective outsourced product solution creates space for a business to innovate, compete, reduce fixed costs, increase revenues, respond to market changes and opportunities, focus on meeting client needs.
Our suggestion then in closing? If you’re going to build a house – call on the experts to construct one which is sustainable and that people want to stay in!