SimCorp JOURNAL OF APPLIED IT AND INVESTMENT MANAGEMENT July 2009 27

# 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 everyone
is asking how it’s going to work. This article gathers views on what industry
professionals think the UCITS IV future may hold. by Richard Willsher

I
f UCITS IV fulfils its promise then says, “will simplify the regulatory
the package of measures it ushers in environment; create cost savings through
could make a very real difference to economies of scale; give greater choice of
scope, scale and organisation of investment funds to investors; and increase
fund management in Europe. The investor protection by making sure that
European Funds and Asset Management retail investors receive clear, easily
Association has described it as ‘a new understandable and relevant information
milestone in the creation of an effective when investing in UCITS funds.”
single market for investment funds’. And
its president, Mathias Bauer commented, Market practitioners agree that it will
“Efficiency and confidence are crucial if have significant effect on the market. “I
the investment fund industry is to remain think it will,” comments Adam Fairhead,
competitive, in particular under the global head of product development
at HSBC Global
“(…) while we have noted a number of Asset Management.
“The master feeder
benefits… and the desire of regulators to work arrangement could
encourage a lot of
more closely together, there remains a lack of consolidation of funds
thereby cutting costs.
detail… The result is that we cannot make The
company
management
passport
business decisions until these proposals have could lead firms to
domicile all their
been fully worked through (…)” resources in a single
location instead of
CEO Jamie MacLeod, Skandia Investment Group having them spread
about. Fund mergers
current difficult market circumstances. cross border should certainly be easier
UCITS IV will enable asset managers to though there is no solution on the tax
deliver these efficiency gains, increase side, which is important.”
confidence in the existing UCITS
framework and help promote the UCITS He adds that the structural change that
brand even more…” UCITS IV will bring about will mean that
businesses may alter the way they set up
Jarkko Syyrilä, of the London-based and organise their fund management
Investment Management Association is operations though not what products they
similarly upbeat. “The new directive,” he 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… The 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 global
asset management structure and Helen
Webster Aegon’s 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 KPMG’s director of
investment management identifies three
key areas that firms will now be focusing
on. The first is where to locate their
principal management company. The
second is where to put their master-feeder
agreements and thirdly, where will fund
administration be carried out?
 28 July 2009 JOURNAL OF APPLIED IT AND INVESTMENT MANAGEMENT SimCorp

# Preparing for UCITS IV

“Just preparing an inventory and The counter to such

suggestions lies in the deep
especially where they are spread across
several locations around Europe. “Just

understanding their own cost structures pools of expertise and excellent

regulatory environments that
preparing an inventory and understanding
their own cost structures will be a

will be a challenge for some firms.”

Director Richard Pettifer, KPMG Investment Management
Pettifer queries whether Luxembourg
and Dublin will continue to grow as
centres for all or some of these activities. significance to their local economies both
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?
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
in terms of income and the employment
of human resources.
Meanwhile before many firms can begin
to address such issues KPMG’s Pettifer
goes on to point out that they need to
better understand their existing businesses
challenge for some firms,” he says.
In summary, UCITS IV’s 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.

UCITS IV – Key features UCITS IV – Timetable

UCITS IV ushers in several measures intended to promote Following approval by the European Parliament, the
grater efficiency in pan-European management of funds: remaining timetable is clear and is unlikely to change:

t
Management Company Passport – A management
company located in one country will be able to set up
and run a fund in another (A fund’s nationality will be
determined by the country where it has been
authorised);
t
Level 2 detail is currently being worked through and
Directive is due to be issued in summer 2010;
t
Member states to adopt and implement rules which
should be effective through the EU by 1 July 2011;

t
Supervision – a management company will be subject t
Economies of scale across borders.

to the supervision and regulation of the country
where it is based;

t
Notification Procedure – quicker, more simplified

regulator-to-regulator communication;

t
Key Investor Information – to be simpler than the

existing ‘simplified’ prospectus;

t
Mergers – framework governing both domestic and

cross-border mergers between funds;

t
Master-Feeder Structures – allow funds to build

economies of scale across borders.