Asset management is currently undergoing a business model transition. Financial advisors are beginning to use a fee-based approach rather than the traditional management model based on transactions which, until recently, had been the standard approach in broker compensation, explains FlexFunds’ director, Mario Rivero, to Funds Society.
According to Rivero, the classic model did not always align the client's best interests with those of the advisor. “Financial advice should be based on a management model which is not dependant on the number of transactions, and, like the industry, the advisor seeks greater consistency and transparency in this regard,” he said.
Rivero explains that in this respect, FlexFunds, a company with offices in Miami and New York, moves ahead of this need in the market by approaching it with a new solution. FlexFunds issues an Exchange-Traded Product, called FlexETP, which is tailored for managing any asset class. FlexETPs have the distribution power of an ETF and the management versatility of a mutual fund.
The underlying assets can be either public or private. These assets are packaged into a product listed with ISIN / CUSIP, and multi-currency custodiable via Euroclear, which makes it very easy for any institution or bank to acquire, deposit, and value.
“Creating an investment fund has restrictions on the type of assets and commissions, as well as requiring a tangible investment of both time and capital,” Rivero added.
“For a complete asset management solution, FlexETP can securitize any investment strategy, and their distribution may be accessed from any country. This is very useful, especially in fragmented markets like Latin America,” he explained.
FlexFunds works in collaboration with Citi, PricewaterhouseCoopers and Sanne Group. As to how they operate and work at FlexFunds, Rivero said that a fund or product is issued within a period of two weeks at a cost affordable to any broker, “which is a great advantage over comparable structures which are more complex and costly.”
In this respect, Rivero explained that Roberto Garcia from the Miami office of Mora Wealth Management is an example of firms which have already opted for FlexFunds vehicles. He launched an investment fund with FlexFunds, focused on a systematic strategy with ETFs, a year ago.
“I found the program very simple and useful for creating my fund,” says Roberto, “having the fund’s administration covered allows me to focus on its management and the relationship with my investors. Membership in the FlexETP is simple and has enabled us to attract clients from other institutions to our strategy. Since its launch, the subscription has multiplied by more than six times the initial amount,” said Garcia.