The success of AQUA II will depend on its ability to open up distribution channels to new markets and develop products to suit them, according to Tria Investment Partners.
AQUA II is the Australian Securities Exchange's (ASX) new system that, among other things, will allow for the quotation of managed funds.
"It's mostly upside for fund managers, but the catch is that a strategy of using AQUA II to sell existing products with existing marketing and sales strategies is unlikely to yield good results," Tria Investment Partners said last week.
"Success is likely to involve completely rethinking the channels being opened up, and developing marketing, product and sales strategies to suit them."
The most obvious application is to expand the distribution of managed funds among self-managed superannuation fund (SMSF) trustees and other self-directed investors, who have found the application process for funds cumbersome.
"It is for everybody, but there is an appeal for fund managers to look at new markets and that is predominantly in the self-directed space," ASX head of customer business development Ian Irvine said.
"We too think there is an opportunity for the growing number of advisers who have chosen the ASX as their venue for listed securities for their customers to now also do so for their managed funds."
Although Tria acknowledged the potential for attracting SMSF trustees, who until now had only had 14 per cent of their assets in managed funds, it also flagged a number of issues.
The scale platforms can generate by aggregating the invested assets and accessing wholesale prices is likely to be lost when investing as an individual through AQUA II.
For advisers that serve the SMSF sector there is also a compliance challenge, as the range of available funds on the system will likely remain much smaller for some time to come than the range that is available on a platform.
Another new application of the system could be the quotation of international funds.
A number of international asset managers are interested to see whether the system will free them of the burden of establishing an Australian unit trust, which requires vast amounts of seed capital.
AQUA II potentially allows managers to quote their overseas vehicles, in particular if they run UCITS structures from Europe.
But Irvine was careful not to set the expectations too high, saying the ASX still relied on ASIC to approve the amendments of the AQUA rules.
"The principal is if they could do it today in another way, generally speaking they can do it through this service," he said.
"But we would need to review their proposal."
Irvine said he hoped the system would see its first quotations in July.
"There are a number of things that we need to achieve before we go live in a commercial sense, which is the approval of our amended AQUA rules," he said.
"We are also in the testing phase of the IT infrastructure. That phase completes mid-June.
"We have a number of what we call foundation members ready to play and they are fund managers, unit registries and brokers. We hope to consolidate that over the next three months.
"If all of those things come to bear successfully, then we expect to go live in July."
He said about 20 fund managers had expressed a strong interest.
State Street managing director and head of exchange-traded funds (ETF) for Asia-Pacific Frank Henze said the new system was unlikely to form a threat to the growth of ETFs in the region, because AQUA II did not facilitate trading in managed funds.
"Just having a daily quotation is not the same value proposition as an ETF. [These] managed funds are not dynamic; there is no ability to trade intraday," Henze said.
"It is an interesting development, but the robustness of trading is important in an effective market."
