Fighting against regulatory fatigue
Ucits has proved to be a resounding success on a global scale, but there are fears about the levels of regulation in the upcoming AIFM directive.
When Peter O’Dwyer, then at KPMG, now marketing director of fund servicing group Trinity Fund Administration, managed to get a sneak preview of Ireland’s draft Ucits regulations in 1989, more than 40 people turned up to a hastily convened briefing at London’s Baker’s Hall, to hear about far-reaching plans for Europe’s fund industry.
The consultancy, along with a handful of lawyers in both Luxembourg and Dublin, was fast to grasp the importance of a Directive from Brussels, which many thought was a tedious footnote to a dull, country-specific industry.
However, the Ucits regulations – allowing retail funds to be marketed and administered from a central hub across European borders – became the starting-point of firstly a pan-European and then a global funds industry. Nearly $8,000bn (€6,485) are now invested under the Ucits label.
For Mr O’Dwyer, the Ucits Directive, launched in 1985, was the key piece of legislation, which allowed Dublin to challenge Luxembourg for the coveted spot of capital of the European funds industry. Yet when Mr O’Dwyer and his colleagues held a follow-up briefing on European Directives in London at the end of February this year, only four people showed up.
Part of the reason for the no shows is an element of regulatory fatigue, with much cynicism surrounding the looming Alternative Investment Fund Managers Directive (AIFMD).
While the industry is fairly unanimous about the marketing power which it has been given by various innovations contained in the original draft and the sequels of Ucits III and Ucits IV – Ucits II was more of a ‘straight to video’ follow-up, which never saw the light of day – concerns are currently at fever pitch about the potential damage which may be caused by a rival directive.
“Given so much negative coverage of the EU, Ucits is one of the most positive things ever to have come out of it. It is a global brand, with global distribution, a defined system of accounting, liquidity and tax certainty,” says Mr O’Dwyer. “But when you look at the AIFMD, it has been three steps forward and 17 steps back.”
He believes that many fund groups are racing to launch Ucits III hedge funds in order to circumvent the harsher regulatory clampdowns expected in the AIFM directive.
