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Key figures in the Luxembourg fund industry speak to Funds Europe about topics such as cross-border distribution, the delegation of fund management and the potential impact of brexit.
Where are the main inefficiencies in cross-border fund distribution and what steps, if any, are being taken to combat them?
EU collective investment vehicles are currently regulated under the Ucits and AIFM Directives and, as at June 2017, the European Commission has estimated that funds marketed cross-border represented about €5.4 trillion (of a total of €13.38 trillion in Europe).
However, out of this, around one quarter were considered as ‘round-trip funds’ marketing cross-border only to one country, which suggests there is unrealised potential.
If we look at inefficiencies related to the AIFMD, Invest Europe commissioned Europe Economics to prepare a study on the ‘Evaluation of the Alternative Investment Fund Managers Directive’, published in December 2017.
The key findings were that the AIFMD has delivered minor benefits at high costs, and that pan-European marketing had become more difficult, slower and costlier, due to differences and inconsistencies between the implementation and application of the rules in each country. It was also noted that operating costs had increased, with the most material drivers being the authorisation process, marketing rules, depositary requirements and minimum capital requirements.
Speaking at the European Financial Forum 2018 in Dublin at the end of January, European vice-president Valdis Dombrovskis commented that the share of alternative investment funds marketed in more than three countries is very low, at only 3%, and that a European Commission proposal due in the spring will seek to reduce the administrative burden and improve clarity for fund managers who want to market their funds across the EU. I am hopeful, therefore, that an efficient system of cross-border distribution can yet become a reality.