Target Market definition for investment funds

New challenges for asset managers

Within the Market in Financial Instruments Directive (MiFID II) framework, the product manufacturers are required to :

• Identify the potential Target Market for each financial instrument
• Specify the types of client for whose needs, characteristics (knowledge and experience, financial situation and risk tolerance) and objectives are compatible with the financial instrument
• Correlate the distribution strategy and the definition of the Target Market

In order to cope with the new MiFID II requirements, the asset managers have to address several challenges :

• Gold-plating across European countries
• Specific requirements from their distributors
• Monitoring the Target Market as a dynamic piece of information
• Potential modifications based on distributors’ post sale information
• The volumes to process as the Target Market must be defined at the share class level

Leveraging on an expertise developed with the best market practice, Deloitte can assist you in meeting these requirements by outsourcing the identification process of the Target Market before MiFID II goes live, as well as maintaining Target Market data throughout the life cycle of the fund, especially during the launch of a new fund or share class.

Target Market definition services

Our proprietary solution can assist asset managers define their Target Market. Our offer combines both high accuracy and transparency to allow the asset managers to efficiently monitor the process, whilst focusing their time on their specific function.

Our methodology leverages on three of our services :

• Data aggregation & analytics defining the type of fund, asset classes and type of share class (e.g. investor type, capital, distribution)
• Fund registration providing fund prospectus where we can find investment objectives & policy as well as the lock-up period
• KIID / PRIIPs production containing future performance, time horizon and SRRI

The collated information is automatically mapped to define the Target Market identification of a share class, i.e. the investor type, knowledge and experience, financial situation and ability to bear losses, risk tolerance, objectives and needs, as well as the distribution strategy.

Finally, our solution includes an access to our D-Board platform, which contains a dedicated application to validate the Target Market prepared by Deloitte. This application allows to amend, validate and monitor the Target Market assessments.

Please see below a screenshot of our application: