Magazine issues » Spring 2012

INSIDE VIEW: Keeping it relevant

ThailandWith Efama’s visit to Asia imminent, Claude Kremer discusses how the association plans to involve the region when it comes to developing the Ucits brand.

The European Fund and Asset Management Association (Efama) plans to visit Asia in May. This will be an opportunity to meet and work with local regulators, fund and asset management associations, and other players in the area.

It will also be an opportunity to hear their concerns and explain how Efama aims to implement new rules affecting Ucits. 

With this in mind, Efama plans to map out a timeline for regulatory changes to ensure the Asian fund industry is well prepared for each development.

Ucits have a proven track record of cost-efficiency and a wide product offering, but now is the time to accommodate the needs of those outside the European Union. We need to and make the brand relevant to the Asian market as it is one of the main areas of growth. 

Ucits is a European success story because it offers robust, well-regulated investment funds to retail and institutional investors. 

  As currently more than 30% of Ucits sales take place outside Europe, Ucits promoters are increasingly working with distributors in Asia, the Middle East, Latin America and Africa to encourage further brand development. 

Ucits have become the most popular cross-border fund product in Asia and demand continues to grow; at the end of 2011 the Hong Kong market watchdog had authorised 1, 347 Ucits funds. 

Studies have shown that despite increasing demand, the share of Ucits funds of the total mutual fund assets in Asia is still small. This means the brand has significant growth opportunities in this region.

Complexities
But Ucits are facing challenges as the European fund management industry experiences a wave of regulation, resulting in Asian regulators publicly questioning whether Ucits are relevant to domestic markets.

Complexity of Ucits products has been one of the main concerns voiced by Asian regulators, along with the need for European institutions to proactively explain the Ucits brand values.

One example of where the complexity of Ucits has led to disagreements was when hedge fund managers entered the Ucits space. Many of these managers are looking to create versions of their hedge fund products to meet rising demand from institutional clients for well-regulated funds, which provide a high level of liquidity. 

Using a Ucits wrapper for hedge fund-style strategies has raised questions by both the European and Asian regulators about whether these products create a false sense of security. This has prompted a discussion of whether Ucits should be split into complex and non-complex products to highlight their suitability for investors.  

This has been a high-profile debate in Europe, one that Efama has been vocal on. We believe that all Ucits are subject to the same requirements and constraints, which limit the types and extent of funds that can be delivered within the Ucits framework. 

This message must also be clearly communicated to the Asian fund and asset management industry.

Efama believes that to ensure the on-going success of the Ucits brand, it is essential that all regulatory changes are explained to Asian regulators and their benefits are clearly defined.

Dialogue
Asian regulators and distributors are essentially our clients. It is therefore important that European regulators as well as the fund and asset management industry communicate to Asian regulators the robust structure of the Ucits framework and the well-developed market procedures. 

Furthermore, European policy-makers and regulators have a duty to involve them at an early stage while regulatory developments are being put in place.

This increased dialogue will show the Asian community that Ucits regulators and providers do not view Asia as one country with the same set of rules, and that it should be approached with adherence to individual existing structures and parameters.

Efama’s visit coincides with the 2012 International Organization of Securities Commissions Annual Conference taking place in Beijing.

Claude Kremer is president at the European Fund and Asset Management Association

©2012 funds global

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