By Sophie Baker
UCITS IV's arrival has been welcomed with open arms by asset managers, says RBC Dexia and KPMG, with the vast majority of UCITS managers taking a proactive approach to the new directive.
A survey by the two firms, UCITS IV: Which business model for tomorrow?, shows that while a new wave of fund mergers lies ahead, the number of management companies is set to decrease.
The European Fund and Asset Management Association's (EFAMA) director general, Peter De Proft, commented: "The fund industry is currently facing numerous challenges in these turbulent economic times that have impacted assets under management and profitability across the industry. One of the important strategic steps for players in the UCITS industry is to fully explore how to take advantage of UCITS IV."
The survey shows that the introduction of the Management Company Passport (MCP), which will allow an authorised management company to provide services in other member states, is one of the biggest changes to be made under the new directive. Results show that managers will reduce the number of Management Companies and will have to consider the location of a centralised Management Company carefully, looking at tax regime (49 per cent), the regulatory framework (44 per cent) and the availability of qualified personnel (33 per cent). The likely winners when it comes to a centralised management company are Luxembourg (43 per cent) and Dublin (18 per cent), although the location of group headquarters is an important issue (23 per cent).
Forty-nine per cent of respondents also plan to restructure their fund ranges, with sub-optimal fund size and high costs to investors acting as key drivers. New feeder funds are expected onto the market, which will be used for targeted fund distribution and will enable managers to enter new markets and segments, with Luxembourg the favoured location for consolidating assets in master/feeder fund structures (81 per cent).
Asset managers believe cost savings will be the most important advantage of UCITS IV (43 per cent), followed by easier access to markets (24 per cent) and increased competitiveness (21 per cent). However, two per cent believe the new directive will bring no benefit, and 45 per cent are concerned about the absence of a tax framework.
"As the results of this survey indicate, UCITS IV is set to have a significant impact on the European investment fund industry," added Jean-Michel Loehr, chief industry and government relations at RBS Dexia. "It is clear that the market is already readying itself to embrace this latest phase of UCITS and has made significant inroads in identifying the broad range of opportunities UCITS IV creates. As ever, education remains key to ensuring that the market continues to capitalise on regulatory changes."
Partner at KPMG in Luxembourg, Vincent Heymans, concluded: "The current economic environment has presented the fund management industry with numerous challenges. It is therefore crucial that, now more than ever, fund managers fully realise the efficiency and consolidation opportunities found within UCITS IV, which allow for cost savings and improved efficiency of operations."
The survey covered 52 asset managers with UCITS funds established in their principal location in the European Union (EU) as well as in the cross-border business centres of Luxembourg and Ireland.