Asset managers rarely operate in one jurisdiction, but there are few legal firms that can easily enable them to sell their investment funds in multiple jurisdictions, according to Zeidler Group founder and CEO Arne Zeidler.
While working at the law firm Baker McKenzie, Zeidler’s boss gave him an idea which he would then develop to become Zeidler Group. That lightbulb moment came from a request for cross-border fund registration. This is a legal process that enables an investment fund domiciled in one country to be sold to investors in other countries around the world. When that request came in, Zeidler’s team wasn’t aware what the process was. “Once we found out what it was, my boss said to me, ‘someone could create a business out of this.’ And so that’s what I did,” Zeidler said.
Zeidler Group was founded in 2008 and its first client was a large financial services institution, which was strongly impacted by the financial crisis. Despite this, the firm’s asset management division was eager to carry on working. Zeidler came in with a pitch to help them register their funds in various jurisdictions. “They said they were rebranding to a new name and needed someone to help them rise out of the ashes. For this they needed to globally re-register their funds under a new name. That’s what I was going to help them with,” he said. Since then, this company has become one of the largest asset managers in the world.
While Zeidler pitched a technology solution, the client wasn’t as bothered by the solution but was more interested in Zeidler himself and what he could do. “So that’s basically when I buried the technology part for a couple of years and just worked as a lawyer on the first mandates.” The company initially started in Frankfurt with Zeidler and one colleague.
When the company began to grow and add more clients, Zeidler decided to move to London in 2016. The first office was in a WeWork, which had a strong community of tech people. With access to the community, Zeidler decided to unearth the technology side and started building the solution he had previously envisioned. Once a prototype was created, it became clear clients were eager for the solution.
Zeidler Group now offers asset managers with technology-driven legal advice to streamline investment fund compliance processes. Its tools support formation of investment funds, ongoing legal management, cross-border registrations, ongoing fund governance, a global knowledge hub, cross-border legal advice, counterparty due diligence, automated document generation, financial calculations, and more.
With the new technology, Zeidler Group went to fix the multi-headed gap in the market. One of the first issues in the market is that many asset management firms operate across multiple jurisdictions, as opposed to just one. Unfortunately, most laws firms are not set up to help people in that way, Zeidler said. What tends to happen is that asset managers need to use the various branches of a law firm that are dotted around the world in the countries they wish to engage with. While this works, it is an inefficient way of working. On the other hand, Zeidler ensures a company can operate in more than 50 jurisdictions all from a central delivery hub, which is based in Dublin. This means a client can phone the Dublin office and get advice on somewhere like South Africa.
The second market gap is simply a lack of a cost-effective solution, particularly for small asset managers. “When smaller asset managers want to set up and launch funds, they always had to go to the big law firms because they used to have more or less a monopoly on asset management law. But it’s very expensive and there is no standardisation,” Zeidler said. To provide an alternative to this, Zeidler integrates its technology to automate workflows and streamline processes. Its solution simplifies the entire lifecycle of a fund, including approvals, document generation, calculations, fee and charge management and more.
Finally, while there are a few law firms that leverage technology, it is in a very axillary manner, he explained. “It never takes the limelight, where in our case it is increasingly becoming the centre of our operations.”
This move towards greater technology dependency led to Zeidler Group launching a new due diligence tool. This tool is based on online questionnaires filled out by counterparties and the data is then used by Zeidler Group to offer expert legal and compliance advice. The solution also enables automated risk scoring and an autofill capability. This tool is the first in a new series of developments for the company, which will see it better collect, collate, utilise and archive data.
While Zeidler Group might be one of the only one-stop-shops law firms supporting asset managers, it does not mean it is always plain sailing. It is tough to break into the market and compete with the established law firms, he explained. When reaching out to potential clients, there might be a push back on the company’s youth. “It’s a challenge that people don’t understand that much of the process is a commodity and should be treated as a commodity. The big law firms still manage to sell it as if it were something very sophisticated, as for example, to draft an investment fund prospectus. But at the end of the day, it can be done with a template copy and paste, or even an automated document generation system.”
Despite this, once the potential client sees the standardised services and technical capabilities, the mindset changes. Zeidler’s growth over the last three years is testament to that, with it boasting 30% revenue growth each year.
Copyright © 2021 FinTech Global