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Fund industry welcomes European Parliament approval of Ucits IV directive

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The UK’s Investment Management Association has expressed its satisfaction with the European Parliament’s vote on Tuesday in favour of the Ucits IV directive, which is designed to ease the

The UK’s Investment Management Association has expressed its satisfaction with the European Parliament’s vote on Tuesday in favour of the Ucits IV directive, which is designed to ease the cross-border distribution of funds within Europe and reduce the fragmentation of the industry with the EU by making fund mergers and manager consolidation easier.

‘Today’s vote is a major milestone in creating a truly single market in asset management and opening up more opportunities for Europe’s investors,’ says Jarkko Syyrilä, the association’s director of international relations.

‘Since its report Towards a Single European Market in Asset Management in 2003, the IMA has been calling for reform of the Ucits directive to make it more efficient for fund management firms to do business cross-border and to allow funds to compete against substitute products.

‘The new directive 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, easily understandable and relevant information when investing in Ucits funds.

‘We call on the European Commission and the Committee of European Securities Regulators to work out swiftly the implementing measures of the directive to ensure that these crucial improvements can be implemented without further delay by July 2011.’

Undertakings for Collective Investment in Transferable Securities are investment funds established and authorised in conformity with the requirements of the original 1985 Ucits directive and its subsequent revisions, which once authorised in one member state can be distributed to investors in other EU countries upon (relatively) simple notification to the regulator in the country of distribution.

The directives lays down requirements for the organisation, management and oversight of Ucits funds and set out a list of eligible assets in which they can invest. Today, the assets under management of Ucits-compliant funds total some EUR6.4trn, equivalent to half the EU’s gross domestic product.

‘This overwhelming approval by the European Parliament represents a key milestone in the further evolution of the Ucits product and is a welcome step toward achieving a single market,’ says Richard Pettifer, a director in KPMG’s investment management practice.

‘The key historical regulatory constraints placed on investment managers that operate across multiple EU jurisdictions will be removed, and as a result, these managers can now take advantage of a fascinating range of options as they begin to design a holistic, global product strategy.

‘Although there are still some tax issues to iron out, the cost savings for both managers and investors from getting the model right are substantial. Managers must start now to develop their future product strategy – 2011 is closer than they think.’

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