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Jack Standen, IQEQ
Jack Standen, IQEQ

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Compliance risks loom for cross border fundraising

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Europe has become the destination of choice for US private asset managers battling to find a place in their own saturated market, yet these prospective pilgrims face an uphill battle in complying with stringent regulations on foreign shores.

Jack Standen, Managing Director of International Funds at global fund administrator IQ-EQ, says that while financial watchdogs have relaxed their hold on financial services in the US, the opposite is true in Europe where regulators are tightening regimes, which may mean “many asset managers may be underestimating the compliance risks that come with cross border fundraising”.

“The reason being is you still see this huge trend to only want to allocate to the larger household names in the US for domestic fundraising. If you’re an emerging shop, you’re having to look at alternative pools of capital, and where’s the first place that you look? Usually it’s Europe.”

He continues: “But sometimes they get a little bit lost in the complexity, and they need to decide whether they are going to take on all this responsibility in managing the products themselves. If you are going to set up as a  Luxembourg or Irish alternative investment fund manager, then you have to put in a load of headcount and resource to paying the licence in the first place, and then in managing it.”

Compliance failure risks – including regulatory fines, investor reputational damage and operational disruption -are serious risks for asset managers especially those at the mid to smaller end with less resource to absorb costly punishments.

The average compliance cost for a mid-sized asset manager has been estimated at over USD5 million annually.

Consequently, outsourcing to global fund administrators is fast becoming the go to solution for fund managers seeking new business overseas that wish to avoid the regulatory minefield that goes with it.

The outsourced global fund administration market was valued at USD9.8 billion in 2025 and is projected to expand to USD19.6 billion by 2034, advancing at a compound annual growth rate (CAGR) of 8.1 per cent over the forecast period 2026 to 2034. 

Standen says competition in the global fund administration market is fierce and it is incumbent on providers to demonstrate specialisms alongside offering specific portfolio management expertise, if they are to stand out from the crowd.

“It’s always going to be a competitive space, and there are certain providers for specific strategies and products that you want to go to market with. It is about finding a firm that best suits [the asset manager’s] requirements and looking for a provider that has a lot more portfolio management experience. For some firms [the service] is a hosting obligation, and it’s very much compliance and governance driven, and sometimes they lack the portfolio management understanding.” 

Standen says even where fund managers have established AIFMs, the regulatory complexity and governance obligations are driving them hand operations to third parties.

“They might have had four or five funds sitting under their own AIFM licence, and they approach us to come on as the AIFM and essentially run the products going forward. We want to hand back our licence and have you guys step in,” Standen says.

According to research organisation, Market Intelo, industry surveys consistently show that more than 75 per cent of alternative fund managers now use a third-party administrator for at least some operational functions, up from approximately 55 per cent a decade ago. 

Among emerging managers – those with less than USD500 million AUM – the outsourcing rate is even higher, often approaching 90 per cent because “firms cannot justify the infrastructure investment required for in-house administration”.

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