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UCITS pooling a model for pensions – EU

EUROPE - UCITS investment fund asset pooling techniques are a possible model for pension funds, according to the European Commission.

"Asset pooling allows simultaneous management of assets gathered by different funds - while maintaining a local fund presence in different target markets," the Commission says in its new White Paper ‘Enhancing the Single Market Framework for Investment Funds'.

It adds: "The skills and costs of successful management teams can be spread over a wider pool of assets. These techniques are not only relevant for investment funds but also as a possible model for pension funds."

Although pooling is increasingly used in some Member States, there are "significant barriers" to cross-border asset pooling. 

There are two types of pooling under consideration: ‘entity' and ‘virtual'.

The former is seen as "technically and legally straightforward" - although it's currently ruled out under the UCITS Directive.

The latter does not require the legal transfer of assets to a receiving fund. But it places heavy demands on fund administration and back-office functions.

The Commission is proposing to amendments to the UCITS Directive to allow entity pooling and "further explore the soundness" of virtual pooling.

The new white paper - a vision for modernising the EU investment fund market - alludes to the role of investment fund in retirement provision. "Effective private solutions will be important to complement state and occupational pensions," it says. "Investment funds provide an established vehicle for accumulating capital throughout working life."

Internal Market Commissioner Charlie McCreevy said of the paper: "The growth of the European investment fund industry has been spectacular. But it still has massive untapped potential.

"These changes will unlock this potential by creating a barrier-free market for investment funds in the EU - meaning more choice and lower costs for investors."

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