08 September 2008

IPE: UCITS III 'heading for mid-life crisis'

The investment industry is in need of the next generation of UCITS IV structures as the credit crunch is hindering the short-term growth of UCITS funds, a survey conducted by Create-Research has suggested.

The investment industry is in need of the next generation of UCITS IV structures as the credit crunch is hindering the short-term growth of UCITS funds, a survey conducted by Create-Research has suggested.

 

The research, entitled Global fund distribution: Bridging new frontiers research, surveyed top executives from 110 fund management companies in 23 countries and found one executive who stated: “Without UCITS IV, UCITS III may soon have a mid-life crisis.”

The report acknowledges the industry is already preparing for a new framework which is set to be introduced in 2011, as “new infrastructures are already emerging to prepare the market for the rapid growth expected from UCITS IV,” according to Amin Rajan, chief executive of Create Research and author of the report.

 

That said, the survey, sponsored by RBC Dexia Investor Services, found UCITS III funds - which have seen a larger take up from institutional clients than retail investors - have also spawned a number of constraints facing fund managers, as 60% of respondents complain regulatory limitations on physical shorting and leverage is holding them back.

 

Moreover, at least one-third executives cited the growth of certificates as a constraint, as investment banks are expanding capabilities into unregulated areas to compete with UCITS III.

 

“Without a doubt, UCITS is a success story,” commented Rajan, though he added the market is now facing significant head winds.

 

He stressed although the proposed UCITS IV will help, additional targeted actions are necessary “if UCITS is to remain a platform for global expansion for many fund managers”.

 

By Carolyn Bandel

 

The full report can be downloaded here

© IPE International Publishers Ltd.