Master-feeder arrangements, parallel funds, and passport complications have made European fund distribution increasingly complex. For many managers, the operational demands of running multi-jurisdictional structures exceed what internal teams can sustain. Third-party management companies (“ManCos”) provide the infrastructure, expertise, and governance that transform complexity into a manageable process.
Managers with global ambitions face diverse investor expectations. European institutions often insist on Undertakings for Collective Investment in Transferable Securities (“UCITS”) or Alternative Investment Funds (“AIFs”).
Theoretically, the solution is simple: establish multiple funds tailored to each investor base. In practice, this creates overlapping compliance obligations, inconsistent reporting, and coordination challenges across regulators and service providers.
Luxembourg and Ireland as hubs
Luxembourg and Ireland together account for more than 80% of European Union cross-border fund assets. Their appeal lies in robust regulatory frameworks, global reputations, and established ecosystems of service providers. Yet even in these markets, structuring cross-border funds requires specialist capabilities that many managers underestimate.
ManCos based in these hubs provide substance, regulatory authorisation, and operational coordination that make complex structures viable.
Where complexity multiplies
Managing a master-feeder structure involves local laws, Luxembourg regulation, Alternative Investment Fund Managers Directive (“AIFMD”) requirements, United States securities rules, and treaty-based tax considerations. Adding a Gulf feeder brings additional local regulatory and substance considerations. Without specialist oversight, this complexity can overwhelm managers and increase regulatory risk.
UCITS: opportunity and challenge
UCITS funds remain the gold standard of global distribution. Irish-domiciled UCITS are registered in more than 90 countries, capturing around 36% of the cross-border fund market. The reach is significant, but the compliance obligations are equally demanding.
UCITS require daily monitoring of diversification limits, liquidity testing, risk management systems that meet European Union standards, and adherence to Markets in Financial Instruments Directive II (“MiFID II”) marketing rules. Many managers underestimate these requirements until they are already in market.
This brings additional considerations in provider selection. Understanding the different service models and levels of oversight is key to choosing a ManCo or AIFM that matches your client service expectations and can support growth across jurisdictions, investor bases, and asset classes. Selecting the right partner is a critical step in building a successful global distribution model.
Service provider coordination
Cross-border funds typically rely on administrators, custodians, legal counsel, and tax specialists across several jurisdictions. Each uses different systems and reporting processes. Aligning these outputs into a coherent framework is time-consuming and costly.
ManCos streamline this by coordinating service providers, enforcing consistent standards, and maintaining relationships with regulators and auditors.
Regulatory change and hidden costs
European regulation continues to develop, from AIFMD II to Sustainable Finance Disclosure Regulation (“SFDR”) updates and MiFID II changes. These shifts affect structures across multiple jurisdictions and require coordinated implementation. Internal teams often lack the capacity to track and integrate such changes while managing ongoing operations.
Costs also multiply in hidden ways: duplicate audits, duplicated due diligence, parallel tax filings, and inefficiencies in reconciliation across jurisdictions. Poorly leveraged structures can consume 40- 60% more resources than necessary.
The ManCo advantage
Third-party ManCos provide:
- Proven expertise in designing and managing cross-border structures
- Integrated compliance frameworks spanning AIFMD, UCITS, SFDR, and MiFID II
- Established service provider networks with harmonised processes
- Continuous regulatory monitoring across jurisdictions
- Scalable infrastructure supporting multiple fund types and investor bases
By leveraging these capabilities, managers can focus on investment performance and fundraising rather than navigating regulatory and operational complexity.
Building competitive advantage
Cross-border structuring is no longer optional for managers with international investors. The choice is whether to spend years and significant resources developing in-house capabilities, or to partner with ManCos that have already built the expertise and infrastructure.
For detailed guidance on master-feeder structures, parallel arrangements, and integrated approaches to cross-border fund distribution, download our guide, European fund strategies: ManCo solution for structuring and managing European funds.
