Tue, Jul 28, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

IMA warns about potential pitfalls in forthcoming European regulation

Wednesday, May 12, 2010
Opalesque Industry Updates -

- UCITS IV package offers the funds industry less than it originally promised

- The Alternative Investment Fund Managers Directive (AIFMD) is much more than a hedge fund and private equity directive.

- Politicians need to differentiate more clearly between different parts of the financial services industry to avoid inflicting unnecessary damage

In a speech Jarkko Syyrilä, Director, International Relations at the Investment Management Association, warned of the danger that "policymakers' good intentions to protect the investors and financial markets can lead to a regulatory overkill with grave unintended consequences". He was speaking at the Association of the Luxembourg Fund Industry (ALFI) roadshow in London, on Tuesday 11 May.

Reflecting on the changes over the last year, Jarkko Syyrilä commented.

"The securities markets globally have rebounded significantly and people are saving again in investment funds. The first quarter of this year was the strongest for fund sales on record in the UK. Savings held in UK funds have topped 500 billion pounds for the first time. So the outlook is promising. We can only hope that the Greek or any other sovereign debt crisis will not stop the still slow economic recovery in Europe.

"Even if the markets have largely recovered, the regulatory reaction to the financial crisis is only gathering strength. This means also a completely new regulatory environment for asset managers."

He commented on the benefits that European regulation has brought to the industry, but expressed disappointment regarding the forthcoming UCITS IV.

"The last five years in terms of asset management regulation were about perfecting the single market to the benefit of the industry and investors. As a result, the coming months we will see the final form of the UCITS IV package. It provides restructuring and consolidation opportunities to asset managers even though the efficiency improvements seem to be much smaller than originally expected, as a result of overly detailed and burdensome rules and uncertainties on how the new rules interplay with Member States' tax legislation."

Whilst recognising the importance of implementing changes in regulation in order to avoid another financial crisis, he warned about potential pitfalls.

"The next few years the regulatory focus will be on trying to avoid another financial crisis of this magnitude. This is quite understandable, none of us as tax payers will want to foot the bill for another banking catastrophe. However, the pressure to regulate quickly and ignoring the processes of better regulation in the EU is about to cause major problems for the asset management industry with disproportionate and unworkable rules."

He stressed the importance of being clear about the impact of regulation.

"Politicians do not seem to be willing to differentiate between different parts of the financial services industry but we all carry the stigma of investment bankers.

Commenting on the Alternative Investment Fund Managers Directive (AIFMD) he pointed out that it is much broader in its scope than hedge funds and private equity firms.

"Though labelled as a hedge fund/private equity directive, it will complicate and add new burdens to the operations of all non-UCITS fund managers.

He went on to give some examples of the damage that may be inflicted.

"The European Parliament's ECON Committee is about to take an approach to third country funds which will significantly damage pension savings of all Europeans. European professional investors will only be able to invest in those third country funds whose manager and its regulator sign to apply the rules of the Directive. It is questionable whether any third country will want to or be able to sign up to these overly burdensome rules. Therefore European professional investors will no more be able to search from among best of breed products globally.

"How will our international trading partners react to this closing of the doors of Europe and will it lead to retaliation? The risks are evident and a big question is how will this impact the global distribution opportunities of European funds, including UCITS?"

He also spoke about the potential impact if these changes were carried over into the UCITS V work.

"UCITS V is scheduled in Commissioner Barnier's working programme for next year, apparently mainly to tackle issues regarding the depositary liability. We all agree clarifications to depositaries' tasks are welcome, but imposing a strict liability on UCITS would be end of the road for many emerging market UCITS and would deny European retail investors the opportunity to invest in the world's fastest growing economies in a risk diversified way, through investment funds."

Source

kb

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Bridgewater turns bearish on China[more]

    Komfie Manalo, Opalesque Asia: The world’s biggest hedge fund Bridgewater Associates and one of the most vocal of China’s potential is now turning its back against the world’s second largest economy as it joins a growing list of high-profile investors who are challenging China’s potentials.

  2. Launches - Ex-Brevan Howard star Rokos builds team for new fund, Former Och-Ziff manager’s firm starts health care hedge fund, Industry veterans launch commodity investment firm Aron Capital Management, Nikko Asset Management launches two UCITS funds, Capital Group plans to debut Asian investor targeted fund[more]

    Ex-Brevan Howard star Rokos builds team for new fund From WSJ.com: Chris Rokos, a former star trader at Brevan Howard Asset Management LLP, has hired an economist from Nomura to join the team he’s assembling for his much anticipated hedge fund launch. Mr. Rokos, whose firm is due to b

  3. Institutions - Pension fund dismisses Texas consultant, Rhode Island pension fund gets 2.2% investment return, far below assumed rate of 7.5%, New Jersey pension investments see a drop-off in returns[more]

    Pension fund dismisses Texas consultant From Sandiegouniontribute.com: The county retirement board on Thursday terminated the Texas consultant who was given the reins of the $10 billion pension fund, and whose investment picks left many employees and retirees feeling taken for a ride.

  4. SWFs - Sovereign wealth funds paid around $14 billion in fees[more]

    From SWFinstitute.org: When it comes to the financial sector, asset management is one of the most profitable industries in the world. The Boston Consulting Group put out a 2014 figure saying there is US$ 74 trillion worth of professionally-managed assets. One of the fastest growing institutional inv

  5. Investing - Carlyle teams with TCW in push for ordinary investors[more]

    From Bloomberg.com: Carlyle Group LP isn’t backing down from its goal of offering alternative strategies to the masses, despite early setbacks. The Washington-based firm is teaming up with TCW Group, which is majority owned by Carlyle funds, to offer three vehicles that give ordinary investors acces

 

banner