The European regulatory initiative known as ‘UCITS’ (Undertakings for Collective Investments in Transferable Securities) has evolved into a “global passport” opportunity for Australian fund managers to achieve rapid, worldwide growth in a cost-effective manner, according to a new survey quizzing funds managers about the registration.
The report of the survey, titled, “Global Fund Distribution – Bridging New Frontiers”, shows that fund managers in the United States and Europe which have taken advantage of UCITS have benefited from rapid product development, larger client bases and operating leverage. The survey of 110 fund companies from 23 countries (representing US$2.3 trillion in assets), was conducted by London-based CREATE-Research and sponsored by RBC Dexia Investor Services. Late last year, Australian equity boutique Maple-Brown Abbott launched three UCITS-compliant funds using RBC Dexia as administrator.
Hunter Hall launched UCITS funds in 2006 but few other local managers have done likewise to date. Managers using UCITS can expect continued growth, the report found. Asset-weighted growth of UCITS registered funds is expected to increase at a compound annual rate of 20 per cent in Europe, 25 per cent in Asia and Latin America, and 12 per cent in Africa.
“UCITS promoters have moved beyond their original goal of distributing and selling robust, well-regulated investment funds to retail investors across the European Union and are now widely distributing in regions such as Asia, Latin America and Africa,” said José Placido, the chief executive officer of RBC Dexia.
“Our research also indicates they hold broad and growing appeal to institutional investors.” UCITS is a series of European Union financial regulatory initiatives dating to the mid-1980s, created to allow fund managers to operate across borders within the European Union under the same set of rules and regulations. According to the survey, the innovation and product development enabled through UCITS registration has helped fund managers attract, retain, motivate and deploy talent. Most of the innovation has been targeted at customising existing products. 82 per cent of survey respondents named ‘rapid product development’ as a key advantage to UCITS registration. As a result, retail investors in Europe have almost four times as much choice of funds as those in the US.
According to fund managers, the three main benefits for clients have been:
• Greater access to a range of trusted brands (64 per cent)
• Greater transparency in invest ment strategies (62 per cent)
• More customised solutions for clients (60 per cent)
The report found many funds managers outside the EU have not yet registered under the UCITS regime. The most common reasons fund manager cite for not registering included:
• Lack of familiarity with UCITS.
• Deliberate focus on their domes tic markets, which are perceived as more profitable.
• Difficultly in finding alliance partners.
• Perception of onerous regulation both inside and outside Europe.
• Difficulty making contacts in diverse linguistic and cultural settings.