following interviews with 80 senior executives, bank of new york research concludes ucits III is a further consolidation driver
Ucits III will be a catalyst for further consolidation in the asset management industry and not just in the funds arena, according to research of asset management firms' and banks' perceptions of the latest European Union (EU) directive.
According to the findings, conducted by the Bank of New York after interviewing 80 senior executives of investment management firms and banks across Europe, Ucits III is viewed as a further driver of consolidation.
'Just under two-thirds, 62%, of respondents anticipate the directive will accelerate the trend towards cross-border mergers in the European collective investment market,' said the Bank of New York's research.
'So it comes as little surprise that almost 80% of respondents believe the winners will be the major financial services business with a real presence in each market.'
The size of a firm and its branding are imperative to a company's cross-border success. According to Philippe Seyll, managing director of investor services at the Bank of New York in London, respondents said they believed the larger the company, the better its chances of survival in a cross-border environment. Smaller firms, which tend to be more domestically-driven, will face tougher challenges under the new directive.
One research participant, who was not named, is quoted as saying: '[Ucits III] is not good for small companies. We are small and we are not in a position to be able to react very quickly like the big companies. Big companies can open a branch just like that, but we cannot act that fast. We have to research everything a lot more. We are not in a position to be able to implement onshore strategies so quickly. Unfortunately, Ucits is better for larger companies.'
Just over half of respondents (53%) said they are reasonably confident that demand for Ucits products will increase over the next five years, as will their ability to increase their cross-border distribution channels.
Banks and fund managers are expecting higher overall levels of cross-border retail demand for some of the new product structures under the new directive, such as funds of funds and money market funds.
The majority of banks (77%) and 57% of fund managers expect a significant demand for Ucits funds of funds. The banks are also expecting fixed interest funds to be popular, with 73% predicting significant cross-border demand.
While the overall report is upbeat on the growing opportunities for asset management firms under Ucits III, the new directive clearly has its critics.
Another participant plainly wrote it off: 'It will not work,' he said. 'If they want Ucits III to work, they will need to encompass and look for the common denominator in Europe. There are too many domestic protective measures and taxation issues in the different European countries. That is why Europe does not work. With Ucits there seems to be a deliberate delay in processing. There is too much tax discrimination.'
‘Important to have an anchor’
Report to be written by TPR
Lack of innovation for solutions
Some 2,000 consumers affected