When investment managers plan a new wholesale fund, attention naturally gravitates to the investment proposition, the strategy, the pipeline, and the capital raising. The trustee arrangement can feel like a structural detail. In practice, it is one of the decisions that most shapes how the fund will operate, how it will be perceived by investors, and where its risk will sit.
A ROLE THAT DEMANDS FULL TIME ATTENTION
Professional trustees are professional trustees. They perform trustee, governance, and compliance functions on a full time basis. Investment and fund managers, by contrast, specialise in sourcing opportunities, managing assets, executing investment strategies, and growing funds under management.
Most investment managers prefer to focus their time, capital, and senior management attention on those activities, rather than on the compliance duties that sit alongside their investment business.
The trustee role is a strictly construed legal and fiduciary function. An independent professional trustee assumes direct fiduciary obligations to investors and legal responsibility for the operation of the fund, including compliance across multiple regulatory regimes and engagement with regulators and government bodies such as ASIC, AUSTRAC under the AML/CTF regime, the ATO, and FATCA and CRS foreign tax reporting. When these responsibilities, and the attendant regulatory risk, are placed with an independent professional trustee, they sit with an appropriately resourced entity whose core business is to manage them.
THE MARKET VALUES INDEPENDENCE
The investment market, spanning investors, financial planners and advisers, family offices, superannuation funds, and institutional investors, consistently views an independent professional trustee as a tangible sign of governance and compliance maturity.
That independence enhances investor confidence in two ways. It provides a professional layer of oversight, and it separates functions where conflicts of interest can arise.
OPERATIONAL BENEFITS AND BETTER OVERSIGHT
An independent professional trustee shifts a significant compliance and administrative burden away from the investment manager. Managers can operate more efficiently and scale their business without a corresponding increase in operational complexity.
The trustee also introduces an important safeguard in decision-making and implementation. This added oversight can prevent costly errors that are expensive to rectify and damaging to both the fund and the manager’s reputation. When that oversight is exercised by a trustee with a strong commercial mindset, it can also support faster processes and accelerate delivery.
RISK TRANSFER AND THE BENEFITS OF SCALE
Engaging an independent professional trustee shifts regulatory and trustee risk to a specialist entity that is structured, governed, and insured specifically for that purpose. Legal responsibility, and the fiduciary obligations owed to investors, move with it.
Because a professional trustee performs these functions across multiple funds, scale efficiencies follow. The investment in infrastructure, regulatory systems, and specialist staff is spread across many funds, reducing the per fund cost and providing a level of resourcing and regulatory depth that is built into the trustee model, available to the fund as a matter of course.
WHAT ABOUT MANAGERS WHO HOLD THEIR OWN AFSL?
A small percentage of investment managers of wholesale funds in Australia choose to hold their own AFSL. It is not uncommon for them to also engage an independent professional trustee. The two are complementary. Together they support a robust, scalable, and investor friendly fund structure that is generally viewed favourably by the market, and they demonstrate regulatory maturity, a commitment to governance, and an intention to operate a properly regulated, long term investment management business.
THE FOUNDATION OF A SOUND FUND
Engaging an independent professional trustee places fiduciary and compliance responsibility in the hands of a specialist business built for the purpose. It transfers risk away from the investment manager and delivers meaningful benefits in time and cost. That forms a base on which to create a structurally sound fund that is efficient and aligned with market expectations.
To read the full knowledge piece, download our brochure, The Value of an Independent Professional Trustee.
For a confidential discussion about your fund, contact MARQ Trustees on +61 (3) 9005 9282 or [email protected].
