In less than two decades since its creation in Sweden in 1999, MFEX has become the largest independent fund platform in Europe and Asia, offering what Ahlers calls a complete and state-of-the-art solution to fund trading, rebates collection, fund information delivery and regulatory technology.
Globally, the firm has 920 distribution agreements with fund houses covering 72,000 funds and has 200 major distributors representing USD250 billion of assets under administration. The firm is currently active in 50 countries in Europe and Asia.
From little acorns…
The company signed its first client in Sweden in 1999, and after a decade and a half of rapid expansion, opened in Singapore in 2014. Ahlers was selected to spearhead the operation in Asia, and he has not looked back since taking the reins nearly five years ago. “We have had great ambition for our expansion in Asia and so far, we are realizing many of our goals out here,” he reports.
MFEX is a fund distribution platform whose raison d’etre is to be the one-stop solution of choice for distributors and fund houses through its four main lines of service - trading and custody, distribution agreements and the collection of rebates (otherwise known as retrocessions, or trailer fees), AML and KYC exchange and fund information. “Under those four service lines and the whole umbrella of distributing funds,” Ahlers reports, “we are trying to facilitate the interaction between fund houses and distributors to make it as easy as possible for them to do business with each other.”
Most of its distributors want easy access to multiple fund houses and their products. For distributors, the value proposition is self-evident – MFEX offers a seamless access to 72,000 funds and its digital platform offers highly efficient transacting and settlement. On the other side of the distribution chain, MFEX sees itself as a strategic distribution partner to fund houses – from global players to local and regional fund houses, from bulge bracket names to boutique investment managers. Ahlers explains that due to MFEX’s origin and independence, it is embedded in their DNA to foster a fully transparent, win-win eco-system that benefits both fund managers and fund distributors.
Independence and transparency matters
MFEX’s message to would-be partners is that the firm has never been owned by an asset manager or by a bank, it has always been independent, and transparency is core to its DNA. “We disclose to our distributor clients and also to the fund houses we work with exactly what we receive on the buy side and what we pass on the sales side when it comes to the trailer fees,” he reports. “We believe this is a win-win situation.” Ahlers elaborates: “Win-win situations can only be sustained if all parties are treated fairly and have full access to all relevant information. Intermediaries, like MFEX, will thrive as long as they provide a value add to both sides.”
Asia in the spotlight
Ahlers reports that MFEX’s progress in Asia has been very encouraging in the time since the Singapore office opened in 2014. MFEX has now signed up over 20 distributors in the region, mostly in Singapore and Hong Kong, but also in Thailand where MFEX’s footprint has been growing exponentially.
“We have focused most of our attention on those three markets and we take an opportunistic approach on the other Asian markets such as Malaysia, Indonesia, the Philippines as well as Mainland China and Taiwan,” he explains. “MFEX now has close to 60 asset managers or fund houses in the region, comprising top tier players from Korea, Vietnam, Japan, Hong Kong, Singapore, Malaysia and Indonesia. Additionally, we have an office in Kuala Lumpur and are currently in the process of setting up another in Hong Kong, pending the issuance of the SEC Type 1 license by the SFC.”
Ahlers notes that Asia is an exciting, but challenging region for MFEX. This is due to its diversity and different speeds of development in various markets, though it is also a region of immense opportunity. “You have a few rapidly developing markets and distributors that are looking for new ways of distributing funds,” he observes, “and that forces us to develop and enhance our system to really provide dedicated solutions.”
Moreover, in Asia, he notes, the AML and KYC requirements can be very different from Europe, which are now tethered to MiFID ii and PRIIPs. “Ultimately,” Ahlers comments, “we are in that segment as an intermediary to facilitate and accommodate both the requirements from the distributors and also the need for the fund houses to make sure that they are all fully compliant with the regulators.”
Ahlers acknowledges that in Asia transparency might not always be so evident to the end investors, but from MFEX’s viewpoint, they must always be provided on both sides - the fund houses and the distributors, with 100% transparency. “There is nothing hidden,” he reports.
MFEX’s priority in Asia – Continued expansion
The plan to achieve this can be broken down into 3 missions:
The first, is to further establish and strengthen the 3 offices in Asia. Its Kuala Lumpur office will serve as the operational hub; Hong Kong as client service and relationship management office for North Asia and Singapore as the regional headquarters
The second mission, linked to the growing footprint in Asia, is continuing to build up the fund distribution network and to further establish MFEX as the preferred fund platform for fund houses and distributors. Developing regional and customized solutions which meet local requirements will remain as the top priority for the years to come.
Finally, MFEX has recently launched a new product called Global Fund Watch (GFW), a digital tool for initial and ongoing AML and KYC compliance. “At the group level, our objective is to onboard more and more fund houses on to our GFW platform, which is currently being used by our distributors.” Ahlers reports, “GFW allows them to store their AML and KYC information securely and to exchange them with MFEX. They can further extend the interaction with our distributor network. The introduction of regulatory technology, or ‘Regtech’ is certainly a goal for MFEX in the region as well.