Cofunds needs a further £4.5bn in assets under administration to begin generating operating profits....
Cofunds needs a further £4.5bn in assets under administration to begin generating operating profits.
The figure, estimated by Cofunds chief executive Clive Boothman in an interview with Investment Week, assumes current cost levels remain the same.
The company, set up as a rival to Fidelity's FundsNetwork, has just over £500m of intermediary assets on the platform. However, it has accumulated a staff of well over 200 since it took its administration in house in December last year and is far from cash generative.
Boothman said the target for assets under management is achievable if the intermediary-only platform can win a significant share of new business and compete effectively in the transfer market for a greater share of the estimated £130bn of assets in the retail funds industry.
Although he would not talk about refinancing the company through its shareholders Nationwide, Prudential, Zurich and Commerzbank, he acknowledged further injections of cash will be necessary as Cofunds remains a cash-burn company.
Boothman added that intermediaries need not fear the owners will become reluctant to further finance the business.
Key areas in which cost savings can be made include switching the bulk of Cofunds business away from paper-based transactions, which currently account for 70%.
Negotiations are under way to end the exclusivity deal under which Gartmore, M&G, Jupiter and Threadneedle products cannot be bought from rival FundsNetwork. Fidelity, a party to the negotiations, has not yet listed its funds on Cofunds but Boothman admitted his clients, now 3,000 intermediary groups strong, want it to go ahead.
Cofunds also aims to increase the number of instruments available on the platform, Boothman said. The term instruments counts income and accumulation units separately. There are currently 750 instruments available but Boothman wants to increase this to 1,200.
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An added tier of asset management can of course deliver additional benefits for certain investors, writes Graham Bentley - just be sure you can justify it to the regulator and, especially, the client