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The benefits of converting to a series trust

Some mutual fund complexes with standalone structures may find greater internal efficiencies and cost savings by adopting a series trust model. In today’s complex compliance and regulatory environment, the professional, dedicated oversight associated with a series trust structure can help to navigate these challenges.






A series trust provides a legal framework where a collection of fund companies operates under one umbrella trust with one board of trustees. The combined collection of fund companies under the series trust shares the cost of administrative, legal counsel and accounting services, insurance coverage and other professional services. As with a standalone structure, a fund company in a series trust operates its business under its own brand independent of the other series trust participants.

Many investment advisers operating mutual funds under a standalone structure may significantly benefit from converting to a series trust based on the following reasons.

Lower Fund Operating Costs

Funds that comprise the series trust enjoy shared economies of scale by having the series trust procure and manage the following key relationships: board of trustees, legal counsel, auditors and chief compliance officer (CCO). In addition, certain expenses such as directors and officers (D&O) and errors and omissions (E&O) insurance, fidelity bond, legal counsel, CCO and trustees’ costs are spread over a larger asset base. These allocated expenses are generally lower than a standalone mutual fund.

Fee Waiver Relief

Lower fund operating costs have the added benefit of potentially reducing the expenses of the fund, thereby reducing the fee waiver, if applicable, by the investment adviser. The reduction in expenses may allow the adviser to allocate the savings to other key fund initiatives that generate ongoing top-line revenue and boosts overall adviser profitability.

Shared Fund Management Responsibility

As a result of the providers to the series trust assisting with the fund oversight, the responsibility for these tasks is shared by the investment adviser and the providers to the series trust. For example, responsibility for certain compliance requirements, administrative testing, board management and SEC examinations is shared with the providers to the series trust and not solely with the investment adviser as in the case of operating a standalone fund company. Importantly, the many facets of regulatory compliance are driven by the providers steeped with mutual fund experience and a knowledgeable board.

Redeployment of Senior Level Personnel

Operating under a standalone structure can be a costly time drain on senior level personnel of the investment adviser. Given the regulatory framework in which funds operate, timeliness and accuracy become paramount in complying with the fund’s organizational and operational requirements. Compliance rules and regulations have become more complex and the inevitable SEC exam can impact a smaller fund company’s operation. A series trust structure shifts some of these responsibilities to the providers to the series trust and often gives investment adviser personnel much needed time to concentrate on more strategic initiatives to guide the business.

Dealer Agreement Support

Within the varying and changing requirements for acceptance by platforms, solely being a member of a series trust does not ensure dealer agreement acceptance, but the process may be easier and faster as a result of the fund’s inclusion in the series trust. For example, if the series trust has already been approved by the dealer, the process to add another fund from a review and operational perspective is rather straightforward. This potential “speed to market” approach does not exist for many standalone trusts.

Consider a Conversion

Increasing fee pressures, rising distribution costs and regulatory complexity are just a few trends causing asset managers to critically evaluate product structures. Converting to a series trust and taking advantage of an established board of trustees and lower expenses can result in significant annual savings to the investment adviser. In addition, for many investment advisers, the soft cost savings of better utilizing senior level personnel can be even greater than the value of the hard cost savings to the funds.

While there are costs associated with a conversion from a standalone structure to a series trust, a standalone fund can benefit by trading one-time conversion costs with ongoing savings. An experienced administration partner can support you with established processes, conversion expertise and a cost-effective approach to conversion.

Visit UMB Fund Services’ website to stay informed of the latest trends in fund administration.
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