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# Preparing for UCITS IV

European Parliament approval for the Undertakings for Collective Invest-ment in Transferable Securities (UCITS) IV has been greeted with enthusiasm

by trade bodies and the asset management industry as a whole. Now everyoneis asking how its going to work.is article gathers views on what industryprofessionals think the UCITS IV future may hold. by Richard Willsher

If UCITS IV fulfils its promise then

the package of measures it ushers in

could make a very real difference to

scope, scale and organisation of

fund management in Europe. e

European Funds and Asset ManagementAssociation has described it as a new

milestone in the creation of an effective

single market for investment funds. And

its president, Mathias Bauer commented,

Efficiency and confidence are crucial if

the investment fund industry is to remain

competitive, in particular under the

current difficult market circumstances.

UCITS IV will enable asset managers to

deliver these efficiency gains, increase

confidence in the existing UCITS

framework and help promote the UCITS

brand even more

Jarkko Syyril, of the London-basedInvestment Management Association is

similarly upbeat. e new directive, he

says, will simplify the regulatory

environment; create cost savings through

economies of scale; give greater choice of

investment funds to investors; and increase

investor protection by making sure that

retail investors receive clear, easilyunderstandable and relevant information

when investing in UCITS funds.

Market practitioners agree that it will

have significant effect on the market. I

think it will, comments Adam Fairhead,

global head of product development

at HSBC Global

Asset Management.

e master feeder

arrangement could

encourage a lot of

consolidation of funds

thereby cutting costs.

e managementcompany passport

could lead firms to

domicile all their

resources in a single

location instead of

having them spread

about. Fund mergers

cross border should certainly be easier

though there is no solution on the tax

side, which is important.

He adds that the structural change that

UCITS IV will bring about will mean that

businesses may alter the way they set up

and organise their fund managementoperations though not what products they

sell to investors or the way the sell them.

Jamie MacLeod CEO of Skandia

Investment Group says that his firm

very much welcomes the variety of

new initiatives being pursued with the

development of the UCITS IV regime.

However, he continues, while we

have noted [a number of] benefits

and the desire of regulators to work

more closely together, there remains a

lack of detail e result is that we

cannot make business decisions until

these proposals have been fully worked

through

Indeed many firms have a number of wide

ranging business decisions to make

regarding how they are structured, locally,

cross border in Europe and globally.

Aegon Investment Management among

a number of others, is in the process of

reorganising its business into a globalasset management structure and Helen

Webster Aegons head of products says

that UCITS IV provides her firm with

some of the tools to do so. At Standard

Life Investments Phil Barker who is head

of European Business Development adds

that it will help reduce costs and help

increase efficiency.

Richard Pettifer KPMGs director of

investment management identifies three

key areas that firms will now be focusing

on. e first is where to locate their

principal management company. e

second is where to put their master-feederagreements and thirdly, where will fund

administration be carried out?

() while we have noted a number ofbenefits and the desire of regulators to work

more closely together, there remains a lack of

detaile result is that we cannot makebusiness decisions until these proposals have

been fully worked through ()CEO Jamie MacLeod, Skandia Investment Group

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Pettifer queries whether Luxembourg

and Dublin will continue to grow as

centres for all or some of these activities.

Or will, for example, firms with head

offices in say Frankfurt, London or Paris,

place their management operations, and

master-feeders in those centres and

transfer fund administration to low cost

centres elsewhere, such as, he suggests,

Poland or India?

e counter to such

suggestions lies in the deep

pools of expertise and excellent

regulatory environments that

Dublin and Luxembourg

already have in place.

To replicate that elsewhere

would take a great deal of time

and cost. Moreover these two

centres will compete tooth

and nail to hold on to all aspects of asset

management work because of their

significance to their local economies both

in terms of income and the employment

of human resources.

Meanwhile before many firms can begin

to address such issues KPMGs Pettifer

goes on to point out that they need to

better understand their existing businesses

especially where they are spread across

several locations around Europe. Just

preparing an inventory and understanding

their own cost structures will be a

challenge for some firms, he says.

In summary, UCITS IVs impending

implementation addresses a number of

longstanding industry issues. But it also

raises a number of structural and strategic

questions that many firms are not yet

necessarily well positioned to answer.

Meanwhile those that are, could be best

placed to seize valuable first-mover

advantages in the new, Europe-wide

investment management market.

Richard Willsher is a London-based financial

journalist and former investment banker.

# Preparing for UCITS IV

Just preparing an inventory and

understanding their own cost structureswill be a challenge for some firms.

Director Richard Pettifer, KPMG Investment Management

UCITS IV Key features

UCITS IV ushers in several measures intended to promote

grater efficiency in pan-European management of funds:

Management Company Passport A management

company located in one country will be able to set up

and run a fund in another (A funds nationality will be

determined by the country where it has been

authorised);

Supervision a management company will be subject

to the supervision and regulation of the country

where it is based;

Notification Procedure quicker, more simplified

regulator-to-regulator communication;

Key Investor Information to be simpler than the

existing simplified prospectus;

Mergers framework governing both domestic and

cross-border mergers between funds;

Master-Feeder Structures allow funds to buildeconomies of scale across borders.

UCITS IV Timetable

Following approval by the European Parliament, the

remaining timetable is clear and is unlikely to change:

Level 2 detail is currently being worked through and

Directive is due to be issued in summer 2010;

Member states to adopt and implement rules which

should be effective through the EU by 1 July 2011;

Economies of scale across borders.