From subscription to exchange: How VP Securities supports Danish investment funds

Over the past few years, an increasing number of Undertakings for Collective Investments in Transferable Securities (UCITS) funds and Alternative Investments Funds (AIFs) have selected VP Securities as their settlement partner.

In this article, the founders of one of VP’s newest UCITS funds, MW Compounders, talk about their road to setting up a UCITS fund and the benefits of working with VP.

After spending almost 20 years in finance and investment banking, including stints at Nordea Asset Management, BankInvest and Danske Markets, and experience as an independent investor, Johannes Møller was ready for a change. “I had been a private investor for the past four years, and I felt like something needed to happen. I wanted to build something up,” he states. And so, in January 2020, Johannes Møller formed his own investment fund. Dan Wejse, his former colleague and long-time friend, joined the venture in May, and MW Compounders was born.

Focus on high-growth stocks and long-term investments 

As the name suggests, MW Compounders’ investment strategy focuses on compounder stocks, investing in high-quality, high-growth companies with a very specific profile. “We’re looking for 20-30 of these compounder companies that we can invest in,” Dan Wejse explains. “We both come from a background as stock analysts, so we carefully scrutinise the companies we select to make sure they have the right combination of organic growth, an attractive return on their invested capital and a sound capital allocation strategy. We’re interested in companies that use their cash flow sensibly, either by making value-creating investments or by distributing profits to their investors.” A major part of the investment strategy is making long-term investments, where stocks may be part of the portfolio for a period of 5-10 years.

Benefits of setting up a UCITS fund

VP Securities supports both AIFs and UCITS funds, giving investment fund managers the flexibility to select the fund model that best suits their investment objectives. For Johannes Møller, it was a question of thinking long-term. “I view this company as my life’s work,” he states. “Since this is what I will be doing for the next 30 years, I wanted to have the final model from the very start. And since I had the capital to do it, I decided to establish a UCITS fund from the outset.” According to Johannes Møller, cost is often one of the main barriers to setting up a UCITS fund. However, there were other considerations as well.

It’s a lot of work every time you have to change your fund structure,” Johannes Møller says. “For example, it can be difficult to take your track record as a fund manager with you, as the data doesn’t really follow you in the Morningstar database.” Being registered as a UCITS also enables MW Compounders to attract more funds, and a wider variety of investors. AIFs can be composed of both liquid and non-liquid assets; however, MW Compounders focuses on investing in liquid assets. “One of our main goals is that our investors should be able to have access to their funds every day. Our focus on liquidity meant that the UCITS fund structure was more well-suited for our needs,” comments Johannes Møller.

Partnering with VP builds investor confidence

For MW Compounders, setting up a UCITS fund also sent an important signal to potential investors. “There can still be some uncertainty surrounding AIFs. The fact that we have a structure that is familiar and well-known, approved by the Danish FSA, all of this helps to build our investors’ confidence. They know that we’re a stable, trustworthy fund with long-term objectives,” Dan Wejse states.

This was also one of the advantages of choosing VP as their settlement provider. “That our fund should be on VP’s platform was really something our investors take for granted. They expect to be able to see their investments in their accounts, and they appreciate that the notifications to the Danish tax authorities happen automatically,” relates Johannes Møller. “Just across the board, there are hurdles that aren’t really hurdles anymore, because we’re on VP’s platform.

Preferred provider for both AIFs & UCITS funds

Whether investment firms and fund managers decide to establish an AIF or a UCITS fund, VP provides solutions that support the whole post-trade value chain, benefitting issuers, banks and investors. “It’s all about providing an efficient, automated infrastructure when it comes to the core services such as issuance, settlement and corporate actions, including dividends and tax reporting,” says Henrik Høj, Senior Relationship Manager at VP.

In addition to these core CSD services, VP offers a range of investment-fund specific services, such as investor register and annual general meeting (AGM) services; tax reclaims on non-Danish companies and distribution fee calculation, to name a few.

In the future, VP plans to offer AIFs and UCITS funds a completely digitised suite of services. “Our goal is always to use technology to help our customers streamline their processes and improve efficiency. By fully digitising the investment fund issuance process, from the initial subscription period to listing on a stock exchange, we can make it even easier for new and established investment funds to connect with potential investors,” Henrik Høj concludes.

What’s next for MW Compounders? 

MW Compounders launched their investment fund on 6 November 2020, with 230 investors and an investment pool of DKK 105 million. Based on the successful launch, MW Compounders is now working towards listing the fund on an exchange.

Read more about MW Compounders on their website:

VP's investment fund services 

  • Data Services
    • Investor Segmentation analysis
    • Distribution fee calculation
  • Tax Services
    • Tax reclaim service on non-Danish companies.