Asset managers delay fund launches amid EU regulation uncertainty


Asset managers are delaying fund launches amid uncertainty over the Ucits V regulations coming in next month.

Data from Lipper shows just four funds have been launched in the UK so far this year, compared with 21 in the same period last year, and 38 in the first quarter of 2015.

Fund managers are waiting until after the 18 March deadline for Ucits V before they launch new funds, according to fund administration provider SuMi Trust.

Consultant Charles Bathurst says: “Many fund managers have postponed launching funds in Europe until the Ucits V regime is established.

“Every fund has to have a new set of documentation, and given that is the case people have said quite rightly ‘why launch a new fund now when we know in the next three months we will have to change all the documents again?’. That is really why people have been holding off.

“If they were planning to launch prior to 18 March, why double up on legal fees and redraft the document? There is no point in doing that.”

Bathurst predicts after 18 March a backlog of new launches will be released through the system.

“Because of the nature of the debate around pay there is still some nervousness about what the rules will finally look like as it is such a hot topic.”

However, the uncertain remuneration rules that come with Ucits V are also causing asset managers to delay.

Ropes & Gray partner Michelle Moran says that while there are draft guidelines on how Ucits V will affect pay at asset managers, there is no definitive guidance.

She adds lack of clarity on how each country will adopt the rules has created a quandary for asset managers over where they will domicile their funds.

Moran says: “Because of the nature of the debate around pay there is still some nervousness about what the rules will finally look like as it is such a hot topic.”

Bathurst adds how each country adopts the rules could create an uneven playing field across Europe.

He says: “An added degree of complexity stems from the fact each major fund jurisdiction will create its own variant of the Ucits V remuneration rules regime, using the Ucits V requirements as a foundation only.

“This matters greatly, because it is likely to influence the choice of European domicile made by standalone managers in particular.

“Shopping for a more amenable jurisdiction would be an ironic consequence of a directive whose purpose is to create a single regulatory regime for mutual funds in Europe.”

Asset managers are given a transition period for existing funds after the 18 March Ucits V deadline, before they have to update prospectuses and key investor information documents.

For prospectus information asset managers have until their next update, with a final deadline of September. For key investor information documents the deadline is the next annual update.

CMS partner Karagh Gilliatt says there is also some evidence of asset managers delaying their updates to prospectuses to avoid having to change them to comply with Ucits V regulation.

She says: “It is very fair to say some people are putting off their annual updates as they want to take as much advantage of the transition period as they can.”

However, the drop in fund launches may also be a trend that will continue this year, beyond the implementation of Ucits V.

Investment consultancy Gbi2 managing director Graham Bentley says a fall in investor demand and the difficulty of raising assets has stopped some managers launching funds.

He says: “Other than finding thematic funds to launch there isn’t an awful lot going for fund managers apart from multi-asset and absolute return funds.

“If you are looking at launching a fund, several things are crossing your mind, with the starting point: are you likely to gather any assets with the launch? Does it enhance the brand and range?

“The propensity of people to launch multi-asset funds in res-ponse to retirement rule change has exhausted a lot of the fund launching capability from marketing departments.”