Fund distribution in the US is changing but digitalization will help companies meet the challenges
Over the past twenty years the US fund industry has seen continuing declines in average expense ratios of long-term mutual funds. For equity funds there has been a 40 percent drop since 2000 (0.99 percent in 2000 to 0.59 percent in 2017).
There is a long-term shift by investors to no-load funds, depriving the industry of the sales charges levied on investors that are typically paid at purchase or redemption. Ten years ago, 53 percent of long-term mutual fund assets in the US were made up of no-load share classes. At the end of 2017 that figure had risen to 70 percent.
In this environment of continuing fee pressure, US fund companies, like their counterparts in Europe, find they must also respond to new regulatory and reporting standards as well as meet investors’ expectations of improved service.
Digitalization of fund distribution, with a blockchain-based ecosystem and including the use of artificial intelligence and big data analytics, is the way to meet all these challenges.
Concrete solutions and the FundsDLT experience
On Thursday 11 October, Olivier Portenseigne, Managing Director of Fundsquare, will be in Boston speaking on a panel entitled “Breaking Down Blockchain” at the 2018 NICSA General Membership Meeting.
During this panel, he will be talking about the experience of rolling out a blockchain-based solution for the fund distribution chain, called FundsDLT, in Europe.
He will detail barriers to creation and adoption and discuss how these can be overcome. He will also talk about the clear benefits and operational efficiencies that blockchain can bring to both the fund industry and to fund investors.
Evolve and change with blockchain
Digitalization of the distribution chain via blockchain will flatten the chain and bring down operating costs, thus allowing fund companies to operate in a low-fee environment.
Additionally, it creates opportunities that enable fund companies and distributors to get closer to investors and to be in a stronger position to deliver investment products that are better-adapted to their clients’ needs.
In short, by streamlining the fund distribution chain and by offering a strategic and real-time overview of the business, fund companies can evolve their business processes to be more efficient and to better serve their investors.
For more information about this event: see the NICSA event site