Brussels launches consultation on UCITS investment funds
EUROPE - The European Commission has launched a new consultation process to assess UCITS issues at a time when institutional investors investing in such structures are calling for more regulation.
The consultation - which complements European Securities and Markets Authority (ESMA) guidelines on ETFs and other UCITS issues released on 25 July - calls for fund management feedback on a number of issues.
Brussels seeks to assess the role of money market funds in the management of liquidity for investors, their engagement in the securities lending and repo markets and their systemic involvement in the overall financial market.
Issues such as the various methods for calculating the net asset value (NAV) for money market funds are also addressed.
According to the Commission, the consultation raises a series of policy options aimed at "maintaining investor confidence in money market funds".
Brussels will also look at UCITS fund managers' employment of so-called efficient portfolio management (EPM) techniques.
The Commission points out that EPM techniques are "widespread" and, in the industry's view, an essential tool for generating additional revenue for the fund and its investors.
It said the current consultation aimed to "deepen" its insight into the "potential systemic and investor implications" raised by a fund's use of EPM techniques.
In a guideline on similar issues released earlier this week, Steven Maijoor, chair at the ESMA, said: "These comprehensive guidelines are aimed at strengthening investor protection and harmonising regulatory practices across this important EU fund sector.
"They increase the level and the quality of information provided by UCITS to their investors, clarify the criteria for the management of collateralised transactions such as securities lending, repo and reverse repos and OTC derivatives, and set out the types of financial index in which UCITS may invest."
According to a survey conducted by Preqin in 2010, 8% of the institutional investors responding were investing in UCITS vehicles at the time.
However, the same survey revealed that more than one-third of investors surveyed (35%) said they were considering to invest in such a vehicle in the coming months, but asked for more regulation to enforce the use of external auditors and administrators, as well as restrict leverage.