Cross-Border Distribution of UCITS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2011

CONTEXT

In 2010, the Czech Republic was the most attractive destination for registrations of foreign funds among new European Member States, with 739 new registrations during the year. The country is very active in the distribution of investment funds, mostly provided through the banking system. More generally, the region of Eastern and Central European countries had been foreseen by Western European players as a territory of easy access and expected huge money flows, corresponding to the high growth of a region that has been opening to investment funds just recently. The region continues to expand its foreign funds sales, although has not yet experienced the huge boom that had been foreseen. Once again, the fi- nancial crisis and consequent insecurity are surely to be blamed in this respect. The growth is still there, though, and steady too. Hungary had 414 foreign registrations at the end of 2010, 165 of which were made during the previous 12 months alone. Further afield, worldwide distribution of UCITS continues to grow. The level of penetration in international investment markets means that UCITS are beyond doubt recognised as the world’s most internationally distributed investment fund product for a few years. Already back three years ago, an article published by The Banker began with these words “They [UCITS] are advertised on the sides of buses in Hong Kong. They are widely promoted in the newspapers of Sao Paulo and Cape Town” 23 . Their success is actually so marked that jealousy is mounting. Rumours spread about as many as four on-going different initiatives to create an Asian equivalent of UCITS granting local products the same distribution opportu- nities that UCITS can today benefit from. One of those, driven by the Australians, appears as the most serious attempt to get all Asian countries organised around a single UCITS equiva- lent. A few years ago, it was reported that the SEC had foreseen a project to create an Ame- rican equivalent of UCITS, in order to be able to market US-domiciled funds internationally as freely as UCITS funds. Such project seems to be abandoned since. East or West, many fund market regulators and industry bodies witness the explosion of UCITS distribution and try to plan solutions to mirror such success locally. UCITS distribution outside the European Union is now focused predominately on three key international regions – Asia, Latin America and the Middle East. Graph 16 illustrates the weight of Luxembourg fund distribution in these regions at the end of 2010. Distribution perspectives outside Europe

1.3.4

East or West, many fund market regulators and industry bodies witness the explosion of UCITS distribution and try to plan solutions to mirror such success locally.

Graph 16: Luxembourg domiciled funds breakdown by distribution regions (in number of funds)

Europe 86.3% Asia Pacific 8.9% Americas 3.1% Middle East 1.4% Africa 0.3%

Source: PwC, March 2011

23 Source: The Banker, “UCITS break out to conquer the world”, 2 June 2008

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