|It’s important to understand the role of clients. Clients are on one side of the capital markets, while bonds, stocks, and commodities are on the other side. It’s the responsibility of fund groups to provide access to these capital markets.|
Institutional Investors: These are organizations that invest large amounts of capital on behalf of others. Institutional investors include pension funds, endowments and insurance companies. They have significant resources and investment expertise, and typically invest for the long term. They often have the ability to negotiate lower fees and access to exclusive investments that are not available to retail investors.
Wholesale Investors: These investors are similar to institutional investors in terms of investment expertise and capital, but they invest on behalf of smaller groups of individuals, such as high net worth individuals or family offices. Like institutional investors, they often have access to exclusive investments and can negotiate lower fees.
Retail Investors: These are individuals who invest their own capital, typically through mutual funds, exchange-traded funds (ETFs) or individual securities. Retail investors generally have less investment expertise and invest smaller amounts of capital compared to institutional and wholesale investors. They often pay higher fees and have limited access to exclusive investments.
Further reading: Institutional investors: Who are they and how do they invest
Domestic vs. foreign clients
As a consultancy working with asset managers, it’s important to understand the differences between domestic and foreign clients.
Domestic clients are based in the same country as the asset management firm and are subject to the same regulatory requirements. This makes it easier to communicate and collaborate with them, and the consultancy can provide tailored advice and support based on its knowledge of the local market and regulations.
Foreign clients, on the other hand, are based in other countries that are subject to their own regulatory requirements. We will need to understand each client’s local market and the regulations that apply to it in order to provide tailored advice and support. Working with foreign clients may require more effort and resources, but it also provides opportunities to expand the asset management firm’s reach and diversify its client base.
Overall, understanding the differences between domestic and foreign clients is essential for effective communication and collaboration with asset management firms, and for providing tailored advice and support to meet clients’ needs and regulatory requirements.
The impact of Brexit
Prior to Brexit, asset managers in the UK could offer services freely to clients across the European Union (EU) under the EU’s single market passport system. However, after Brexit, the UK is no longer part of the EU’s single market and passporting regime.
As a result, UK asset managers are now subject to different regulations when providing services to clients within the EU. To continue providing services to these clients, UK asset managers must comply with the EU’s regulatory framework and potentially establish a presence within the EU.
This has led some UK asset managers to shift their focus towards domestic clients, as they may face fewer regulatory barriers and operate in a more familiar market. Additionally, some asset managers may choose to focus on clients outside of the EU, such as those in Asia or the Americas.
- In most European companies, the majority of assets are managed for domestic clients.
- The UK is an exception, with 44% of assets being managed on behalf of overseas clients.
- The UK asset management space is 79% institutional, with pension funds and insurance companies dominating. 20.2% of this industry is retail – a smaller pool of clients, but one that is subject to higher fees and is therefore more profitable to asset managers.