Ucits IV paperwork will surprise regulators

Natixis Asset Management says regulators will have “wheelbarrows” full of documents to sort out once Ucits IV becomes law in July 2011.

The French manager believes financial watchdogs, including France’s AMF and Luxembourg’s CSSF, will be “surprised” by the amount of work the directive creates for them. The suggestion is that their naivety could reduce the efficiency of Ucits IV for asset managers.

Jean-Christophe Morandeau, head of legal affairs at Natixis AM, says: “When listening to regulators, they say that their main issue will be fund notification, but they don’t talk much about rationalisation. They may be surprised at the workload [that creates].”

He believes some large managers will rush out to rationalise their fund ranges.

The Ucits IV directive provides new tools for fund managers to help reduce their fund range, such as a framework for cross-border fund mergers and for master-feeder fund structures.

Although many believe those reforms will be hampered by tax issues, Natixis says big players such as Amundi and BNP Paribas Investment Partners will try to take advantage of the reform immediately, “filing wheelbarrows full of applications”.

BNP Paribas IP, which is in the process of merging a first raft of around 30 funds, was not available for comment. Amundi was also unavailable for comment.

Natixis AM, however, confirms it will cut its fund range, using the opportunities provided by the master-feeder fund structure.

The asset manager currently offers ‘twin’ funds for two banking networks in France. In future, it will be able to merge these funds and replace them with a master fund fed by the two feeder funds.

Marketing director Christine Lacoste says that unlike other large managers Natixis AM will not be able to take advantage of the potential savings made from merging funds listed at home and abroad.

Most large cross-border players have fund ranges both in their home markets and Luxembourg, but the bulk of Natixis’s funds are domiciled only in France.

Ms Lacoste says: “All the innovations that exist under Ucits IV are interesting for us, but the potential it offers in terms of rationalising our product lines will be less significant for us compared to some other asset managers given our predominantly French-domiciled offering.”

A key consideration when using the Ucits IV toolbox will be the needs of distributors.

For example, the management company passport – another Ucits IV reform – will end the requirement for an asset manager to be authorised by a regulator in the country in which it distributes its funds.

A company will be able to sell its funds in any European member state from just one country, as long as it has been given the green light to operate in that country by the local supervisor.

Ms Lacoste says: “We will need to find out how distributors want to work. Today we offer French-domiciled funds and register them in foreign countries. Tomorrow, distributors could ask for locally domiciled funds because they find that it is easier commercially.”

The French manager also says it intends to take advantage of the directive’s streamlined notification procedures in order to increase its presence abroad.

Under the new rules, regulators in host countries will have to authorise funds within 10 days, whereas time to market can take several months under Ucits III.

Baptiste Aboulian is associate editor of Ignites Europe, a Financial Times publication, where this article first appeared