Cross-Border Distribution of UCITS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2011

CONTEXT

by far the highest momentum. And such momentum is not limited to France, IFAs scored well in Italy as well, being second only to discretionary accounts, which tend to remain Italy’s favourite so far. More conservative, Spanish players still bet on a further development of bank-driven distribution of funds, but surprisingly enough they also predict a substantial growth for direct sales 11 . In Germany the predominant model is guided architecture, through which banks distribute their own funds as well as selected external fund products from a limited number of partners; Guided architecture was initially the banks’ answer to the growing market share of IFAs. They first opened their doors, slightly, to third-party products through the use of German funds of funds, which allowed them to meet the growing demands for third parties’ products within their channels. Then, under the pressure of growing demand from customers for a more extensive choice of funds, many banks widened their distribution activities by using open architecture and opened up to third-party (non-German) products by establishing fund-platforms. The non- German funds also became more and more reluctant to accept fund orders directly from IFAs in light of the transfer agent requirements imposed on them (many thousand individual investors instead of just one bank). These developments led to the creation of fund platforms catering for the needs of IFAs and fund managers alike 12 . To conclude, graph 5 clearly summarises for all European cross-border distribution channels their importance in future industry developments, as rated by survey respondents and hence sends a clear message that the predominance of banks (and local banks) is not yet over.

1.1

Graph 5: Cross-border distribution channels’ growth potential as viewed by Cerulli Associ- ates survey respondents, January 2011

5

4

3

2

4.3

3.3

3.3

3.0

3.0

1

1.5

5 = Most important 1 = Least important

0

Retail banks

Fund of funds

Bancassurance

Private banks/ discretionary accounts

Independent financial advisors/platforms

Direct

Source: Cerulli Associates, 2011

11 Source : “European Distribution Dynamics 2011”, Cerulli Associates, May 2011 12 Source : Norton Rose, “Selling investment funds to German private investors - legal and regulatory issues”, July 2008

Cross-border distribution of UCITS | page 13