Context and issues

Since the first UCITS directive in 1985, European management companies have broadly used UCITS, whose brand is recognized worldwide. However, the initial goal of an integrated pan-European fund distribution model has not been fully achieved yet, as mentioned in our “Cross-border distribution of UCITS” publication issued in November 2008. The UCITS IV directive, adopted by the Council of the European Union on 22/06/2009 and whose implementation is expected by mid-2011, aims at improving the single market’s efficiency by reinforcing the asset management industry’s competitiveness and by improving fund distribution, while maintaining the level of protection granted to investors.

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What could we expect from the revision of the UCITS directive?

The UCITS IV directive will have significant effects for all in terms of information and will contribute to more cooperation between regulators and European authorities.

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Will it have the hoped-for effects in cross-border distribution and economies of scale?

Without doubt, the simplification of the notification procedures represents a positive step and it is likely that management companies will exploit the wider opportunities offered to them.

The cross-border master-feeder structure also appears significant because it uses known techniques may contribute to exploiting the strengths of the various European financial markets as well as the different industry actors, which are at the disposal of promoters groups and fund distribution groups. The opinion given by the the CESR, on the future level measures 2, confirms, however, that that the road will be clear to meet the definition of a system where responsibilities are clearly identified and balanced between the actors.

Nevertheless, professionals have reservation on the range of measures as concerns cross-border fund mergers. In this area, in the absence of European harmonization, the proposed disclosure requirements would remain binding and the tax impacts of these operations still represent a significant barrie.

Finally, the European passport for management companies should lead to a differentiation of actors by services. In this context, professionalism and an international presence will be important pluses to support the development strategy.

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