Co-founder of MA Operator Shannon Bernasconi has received early support from large and boutique fund managers.
by Alice Uribe
More than 25 big-name fund managers including Magellan, Vanguard and Macquarie Group, have thrown their weight behind a new managed fund trading platform that its founder says may be a challenger to established bank-run platforms and the ASX’s mFunds.
The platform, uXchange, allows members to manage a portfolio of Australian and global managed funds and was launched last week by fintech MA Operator. It has more than 80 managed funds on its investment menu and 14 Australian Financial Services licensees from non-bank aligned financial planning groups have started using the service.
Shannon Bernasconi, co-founder and executive director of MA Operator, said uXchange charges no ongoing fee to its users, instead charging per transaction, capped at $50 per trade.
“But uXchange also provides a distribution channel for fund managers that wasn’t there before. It’s a concentrated distribution channel for high net worth and self-managed superannuation fund investors, through an independent channel that isn’t then influencing their own products and services like a platform would,” Ms Bernasconi said.
“The reaction [from fund managers] has been that this is a great mechanism for them to start connecting to a market [of non-aligned licensees] that was quite hard to get to before because is was so fragmented.”
Fund managers can appear on the exchange fee-free for the first 12 months. Ms Bernasconi said that managers might then pay a one-off fee of $1000.
“If as a community we wanted to do some kind of marketing, something for the purpose of growth, then we could leverage that $1000,” she said.
“It was not my intention to make money from fund managers. It’s a channel for the people, mostly the adviser and the client, but the fund managers get to benefit from this distribution channel.”
According to uXchange’s approved product list as at June 16, global fund manager Dimensional had 21 funds on the platform, while Vanguard was close behind with 18 funds. Magellan’s global fund appears, along with some of its other of its funds.
Eight of Pinnacle Investment Management’s funds from managers including Hyperion, Plato and Spheria have also joined the platform, which has Equity Trustees as its responsible entity.
Pinnacle director of distribution Adrian Whittingham said the financial services industry needed more creative ideas.
“What is attractive about uXchange or mFund, or other product providers, is that the market needs innovation,” he said.
“If you make it challenging for people to invest they will choose passive or do it yourself. So at the heart of this is about accessibility.”
Ms Bernasconi predicted that uXchange would compete directly with both bank-owned platforms but also mFunds, which she said had disappointed from an accessibility perspective.
“mFunds came out of a need, like any innovation, for those investors that are moving off platform to have access to managed funds. The concept was right, the need was there, it’s just the implementation of it has fallen short of the expectations,” she said.
“From personal experience, when you do place an order through mFund, you do have to go specifically to the broker’s actual screens, so a person at the adviser end has to physically do something, whereas they’re used to a world where that just happens.”
Data from the most recent ASX funds monthly update shows mFund now offers access to 173 funds from 55 fund managers, with funds under management at the end of May standing at about $347 million, representing an increase of just over 148 per cent over 12 months.
“ASX’s mFund continues to show strong inflows with the level of funds under management doubling in the last 12 months from $140 million to $350 million at the end of May 2017. The ability to hold mFunds through CHESS as part of an overall portfolio of ASX-quoted investments, makes the service particularly attractive to retail investors, including those in the growing SMSF sector,” Andrew Campion, ASX’s senior manager of investment products said.
In February the Australian Securities and Investments Commission allowed products requiring long-form product disclosure statements – such as hedge funds and derivative products – to sit on the ASX-operated exchange, which allows retail investors to invest in unlisted managed funds.
Ms Bernasconi said uXchange “crowd sources” any funds its adds via adviser or client requests.
“We don’t determine the list, which is what a bank-based platform does … we’re not going to add funds on unless there is some demand,” Ms Bernasconi said.
“We have quite a dichotomy of the big end and the smaller end and there are quite a few specific fund managers we’ve been asked for.”