European asset managers enter US market via ‘subadvisory contratcs’

Asset managers are entering partnerships that separate responsibility for sales and clients from the actual investing as they scramble to increase assets and penetrate new markets while keeping expenses low.

Asset managers are entering partnerships that separate responsibility for sales and clients from the actual investing as they scramble to increase assets and penetrate new markets while keeping expenses low.

Particularly among institutional managers aiming to reach individual investors as well as European money managers trying to enter the US market, enthusiasm for so-called “subadvisory” contracts is considerable. This is why they may access the US retail market without having to invest heavily in massive sales forces.

Asset managers that have historically provided mutual funds on both sides of the Atlantic are also engaging in comparable transactions to broaden their investment strategies in quickly expanding industries like exchange traded funds or individually managed accounts.

The main fund manager owns the fund and is responsible for collecting and handling customer funds in a subadvisory relationship. The subadvisor is in charge of investment decisions, such as how the money is invested.

The strategy enables institutional managers to reach out to retail investors without the need for a large sales team.

Read more: https://www.ft.com/content/c6756631-706f-4d18-96f5-bfdd66c2554f