Investment Funds
The Investment Fund Application
The Investment Fund Application of the GFX Global Hub and SpokeSM System is the next generation solution for investment fund sponsors to efficiently operate multiple funds with the same investment objective and policies; effectively expand across borders and national market segments; create and operate sub-advisory/private label funds for their distribution partners; and employ sophisticated portfolio management techniques to adjust a portfolio’s investment strategy for a specific national market or market segment.
The GFX Global Hub and SpokeSM System is the first that permits an asset management organization to operate a single portfolio with assets from investment funds sold publicly in the U.S. (mutual funds), Europe (UCITS) and Asia. This System is used for different types of investment funds as well as banking, insurance, and other investment products.
The GFX Global Hub and SpokeSM System thus results in:
- Efficient and cost effective portfolio operations through a single investment manager, a single safekeeper, a single auditor, single gross investment performance, and a single portfolio compliance platform across fund ranges and across borders for the same investment objective,
- Effective new market entry through the critical mass and performance track record for new investment with the domicile and other components selected independently from other participating funds in accordance with the applicable legal/fiscal requirements and market conventions of their intended market segment,
- Efficient and cost effective sub-advisory/private label arrangements between the fund sponsor and its distribution partners through the creation of new participating funds sponsored by the distributor, and
- Customized investment policies through the ability to change, expand or modify the investment strategy of a portfolio for each national market or market segment.
The principals of GFX have developed and operated many innovative fund structures over the past several decades, including the hub and spoke structure. The staff of the U.S. Securities and Exchange Commission reviewed that structure and concluded that “the organization of mutual funds in hub-and-spoke arrangements is an important evolution in the mutual fund industry.”
These development efforts have continued to evolve so that currently GFX is licensing the know-how and software necessary to implement and support the Investment Fund Application of the GFX Global Hub and SpokeSM System.
U.S., Europe or Asia
The GFX Global Hub and SpokeSM System is used by two or more investment funds, or other investment products, to invest through a single GFX Portfolio. These investment funds could be U.S., European or Asian.
The GFX Global Hub and SpokeSM System involves the separation of the portfolio components of the investment fund from the administration and distribution components. Once separated, other existing or new investment funds can likewise separate their investment components and invest through that same investment portfolio. This single investment portfolio is referred to as a GFX Portfolio and each of the investment funds investing through it are referred to as a participating Fund.
As the portfolio components are separated, so are the expenses (e.g., management fee, custodial fee) associated with them. These expenses then, in turn, form the basis for the expense ratio of the GFX Portfolio. As additional funds invest through that GFX Portfolio, that expense ratio should become lower as break-points in those fee schedules are reached. With two or more participating Funds, the transaction based expenses (e.g., trading and settlement expenses) should also become lower. As a result, the aggregate expenses of each participating Fund should be lower than they would be if that Fund continued to operate as a traditional investment fund.
As the portfolio components of an existing investment fund are separated from the other components to become a GFX Portfolio, that portfolio retains its performance track record, adjusted for expenses. Thus, in turn, a newly-created participating Fund has that same track record at the time of its organization, adjusted for expenses.
The following diagrams illustrate two parallel traditional investment funds (Fig. 1), and those same two investment participating Funds in a GFX Portfolio (Fig. 2).