Italy pounces on new EU directive
Ucits III may have received a luke-warm reception in some parts of Europe, but Italian banks have seized the opportunity for new lines
“I could sooner reconcile all Europe than two women,” Louis XIV, the 17th century King of France was once reported as saying. The veracity of the former French King’s comparison is still being debated by scholars of history and human behaviour. But European cultural divisions are highlighted in the diverse interpretations to the latest financial regulations.
Ucits III, the EU directive which allows for a broader range of investment instruments to be used in funds sold across European borders, has received rancorous endorsement in some parts of the Continent, but is treated with a polite, feigned interest, together with a stifled yawn elsewhere.
UK-based managers, confident of a relatively healthy funds industry, fuelled by commission-hungry ‘independent’ advisers, are among the most non-committal. Many believe, with a certain post-colonial arrogance, that they already have all the best products in their armoury.
Last gasp opportunity
The atmosphere in Italy is not necessarily so positive about the future. The moribund ?540bn industry has seen few recent inflows from the retail market. In fact, most of the assets gathered by the big banking networks and their in-house producers date back to 1998 and 1999.
So, not surprisingly, the new directive is seen in Milan almost as a last gasp opportunity, a chance to launch some new lines, quite unlike anything seen before in this corner of Europe.
Domestic regulations drawn up by the Bank of Italy for local fund management groups were always a lot tighter than those in neighbouring jurisdictions. Money had to be managed according to a strict benchmarking system, which gave managers little incentive to search for any alpha. In fact, they were really prisoners, with very little room for manoeuvre.
The new directive, already absorbed into the Bank’s regulations, allows the extensive use of derivatives, and a much more free-roaming approach, which will lead to the launch of a raft of total return products later this year, plus those investing in commodities and long/short strategies.
New ranges
Groups such as San Paolo IMI, Nextra – about to merge with Credit Agricole’s asset management arm – and Monte Paschi will be launching around 20 products each, with much scope for active switching of assets between classes. And they all have captive distribution, so their marketing machines should ensure at least modest take-up.
Latest research from PWM, Credit Suisse Asset Management and Feri Fund Market Information (detailed in our supplement with this issue, and officially launched at the Fund Forum in Monaco) reveals a strong appetite among Europe’s key fund buyers for these flexible, total return funds as well as hedge funds. But there is also a strong requirement for capital preservation.
