Does every ManCo really need its own investment capability?

The more interesting question

There is a familiar pattern in regulated financial services. An activity becomes important. The instinct is to internalise it. Hire people. Build systems. Add governance. Create continuity arrangements. Add oversight. Then, once the infrastructure exists, make sure there is enough business to justify it. Sometimes that is exactly the right decision. Sometimes we have simply turned a capability requirement into a fixed-cost problem. Portfolio management is a good example.

An investment capability is more than a portfolio manager

When people discuss whether a ManCo should maintain portfolio management internally, the economics are sometimes reduced to headcount. That understates what a credible investment capability actually requires. It can mean experienced portfolio managers, thematic and fundamental research, quantitative signals, portfolio-construction tools, market systems, risk infrastructure, continuity, governance, documentation and enough depth to explain the process when markets are doing something unpleasant. A Bloomberg terminal and an investment committee do not, by themselves, constitute an investment platform.

For a specialist capability required by one or two funds, the calculation can look very different. And the more diverse a third-party ManCo's client base becomes, the more obvious the issue gets. One initiator may need systematic asset allocation. Another specialist fixed income. A third thematic equities. A fourth a very specific risk-managed mandate. Trying to internalise every capability that might eventually appear on the platform is not necessarily evidence of strength. It may simply be expensive.

Build, partner or delegate

I would look at the decision in three broad ways. Build when the investment capability is strategically important, recurring, supported by sufficient scale and something the organisation genuinely wants to develop as part of its own proposition. Partner when the ManCo wants meaningful investment competence internally but benefits from specialist research, technology or portfolio expertise around it. Delegate where execution can be performed better by a specialist external manager and the ManCo retains sufficient competence to select, understand, challenge and oversee that manager. All three models can work. The mistake is treating one of them as inherently more sophisticated than the others.

An internal team is not automatically better governed because the people have the same email domain. An external specialist is not automatically more efficient because the cost appears on a supplier invoice rather than the payroll. The right model depends on scale, strategic relevance, complexity and the quality of the capability available.

Delegation is not a substitute for understanding

This is the part that matters most. A ManCo can delegate portfolio management. It cannot sensibly delegate curiosity. If the organisation responsible for oversight cannot explain what the portfolio manager is doing, where the material risks are, why performance has behaved as it has or what would trigger escalation, the problem is not delegation. The problem is the operating model. Good oversight does not require recreating the delegate's investment team. It requires enough expertise to ask intelligent questions. Is performance consistent with the stated process? Have the risk exposures changed? Does the portfolio still behave as expected? Has the model changed? Has a key person left?

Is the mandate still appropriate? What would make us intervene? Knowing which question to ask next is, in my experience, one of the more underrated governance skills in financial services.

The ManCo of the future may be an orchestrator

Third-party ManCos have evolved far beyond regulatory administration. Their role increasingly combines governance, risk management, delegate oversight, product support, regulatory responsibility and coordination across an ecosystem of specialist providers. That does not necessarily mean they should become vertically integrated investment houses as well. A strong ManCo may instead become exceptionally good at orchestrating specialist capability. It owns governance. It understands the investment process. It retains accountability. And it connects the right expertise to the right mandate without pretending that every possible investment specialism must permanently exist under one roof.

That can be economically more sensible. It can also be better for fund initiators and clients. So, does every ManCo need its own investment capability? It needs investment competence. It needs the ability to challenge. It needs clarity about responsibility. Whether every portfolio manager delivering that expertise needs to sit on the ManCo's payroll is a different question entirely.

This article reflects the author's views and is intended for general information and discussion only. It does not constitute investment, legal or regulatory advice. Corentera Capital S.à r.l. has applied to the CSSF for authorisation as an investment firm. The authorisation process is ongoing and Corentera Capital does not currently provide services requiring such authorisation.