Business
UCITS IV
OVER-HYPED The mutual fund industry is getting ready for new Europe-wide rules, which have been met with equal parts of excitement and dread. Will the new regime be good for Luxembourg? Text: Aaron Grunwald
Europe’s long-promised single mutual fund market may get a step further to actually being “single” come July 1, when a new EU directive called UCITS IV comes into force. Lately fears about Luxembourg losing its place as European funds capital have diminished, service providers have toned down the hype machine, and most industry players have come to the realisation that the new regime offers balanced benefits in the long-run. Some aspects of the regime are obligatory, such as a new standardised brochure--called a key investor information document (KIID)--that must be provided to each individual investor before they make an investment decision. However, a bigger slice of the directive is optional. For the fi rst time, funds based in different countries can merge across borders; funds based in one country can be managed by firms located in another jurisdiction (using a so-called management company passport); and a
DATE LINE May – June 2011
single, large cross-border fund can be sold in different markets under different names (using a so-called master-feeder structure). As the European market is widely seen as over-crowded with overlapping and confusing fund options, these EU provisions ultimately have the potential to significantly reduce funds’ overhead costs, and thus consumer costs, while boosting net asset inflows. Although the new rules take effect July 1, fund managers have a year’s transition period to adapt some requirements, such as the difficult-to-prepare KIID. Other requirements, such as regulatory fi ling and risk management procedures, must be implemented immediately. There a gap in readiness emerges. RE-TOOLING UCITS “offers a toolbox which we can use to manage the range of funds,” says Marnix Arickx, head of fund engineering at BNP Paribas Investment Partners in Brussels.
NO SUKUK? The finance ministry MAY has not yet made a decision on issuing Sukuk, or Islamic compliant bonds, according to Luxembourg’s central banker. Yves Mersch said better tax receipts this year led the Grand Duchy to review all its debt issuance plans.
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Indeed, the regime is “an efficiency toolkit making the European single market in mutual funds broader and deeper,” says Bill Lockwood, conducting officer at Franklin Templeton (see article page 28). “But I don’t think anyone will be jumping up and down on July 1 saying ‘I have master-feeder in place!’” “Our impression is that most market participants have concentrated their efforts on the mandatory parts of UCITS IV, leaving for a later stage the ‘opportunity’ ones,” observes Enricho Turchi, managing director of Pioneer Investments in Luxembourg. “This is all about future development, not all that much about existing fund ranges,”
IT’S NOT A HUGE NUMBER” Marnix Arickx
ILLICIT CIGS Japan Tobacco Int’l MAY and Luxembourg Customs agreed on an anti-counterfeit cigarette programme. A spokesman for JTI told Delano that an estimated 8.9% of cigarettes sold in the EU are fake, costing European governments €10 billion annually.
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COMPETITION Luxembourg is the MAY 4th most competitive country in Europe and 11th in the world, according to the Swiss management school IMD. The US, Hong Kong and Singapore top the global ranking, while Croatia, Ukraine and Greece are at the bottom in Europe.
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08.06.2011 16:09:35 Uhr