UCITS III "to boost pan-European fund admin"
EUROPE - The European directive on collective investments known as UCITS III is expected to lead to the emergence of pan-European fund administration services, according to a report backed by securities services specialist Bank of New York.
The report found that UCITS III "is expected to lead to the emergence of pan-European fund administration services and to accelerate the development of third-party mutual fund distribution networks".
However, the fragmented state of European mutual fund settlement was seen as a barrier to success by many respondents.
But it found that more than half of the respondents do not intend to change the structure of their management companies to benefit from UCITS III. It said that a minority intend to set up new management companies to act as multiple fund sponsors.
The directives on UCITS, or Undertakings for the Collective Investment of Transferable Securities - are part of a long-term plan to set up a single European market for collective investments. The so-called UCITS III will provide funds with greater flexibility in the types of investments they are permitted to make, such as investments in other funds, money market investments and derivatives.
The survey, commissioned by BoNY and conducted by TNS in May and June, also found that UCITS fund of funds appear likely to be the most popular of the new range of cross-border products.
It found UCITS III was viewed as a leading to consolidation, "accelerating the trend towards cross-border mergers and leading to a consolidation of fund ranges".
"The winners are expected to be the major financial services businesses with a real presence in each market," the report said.
And there was what BoNY termed "considerable appetite for outsourcing fund administration among larger market participants".
Jeffrey Tessler, executive vice president and general manager of Europe at the bank, said: "The research suggests that while there are some reservations about the implementation of the directives, they have been broadly welcomed by the industry and provide the opportunity to increase the supply and demand for funds across Europe.
"The research also suggests that UCITS III will further drive consolidation in Europe and help develop third-party distribution networks. To succeed in pan-European fund distribution, a focus on efficiency and core competencies will be essential, and the option of outsourcing non-core operations such as administration is likely to become more prevalent."
Research firm TNS conducted 80 interviews with market participants in May and June.