Cross-Border Distribution of UCITS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2011

CONTEXT

In 2008, EFAMA conducted a survey assessing the relative importance of Europe, Asia, Latin America and the Middle East in the net sales and promotion of cross-border UCITS. 82% of the participants in the survey believed that the proportion of UCITS held by investors in Asia would grow in the coming years. Additionally most fund managers agreed that UCITS would increasingly source assets in the Middle East and in Latin America. Retrospectively, this prediction has not yet occured and actually the proportion of UCITS distributed in their home territory (that is Europe) even increased slightly since 24 . Having said so, one should take into account the extent to which worldwide economies have been hit by the financial crisis since the EFAMA report was published. The table hereafter shows the total number of cross-border funds registered in the top country of each continent and last year’s varia- tion. All four of these top countries experienced negative net new registrations for the year, which should not drive to the hasty conclusion that cross-border distribution as such is in decline. It should actually be analysed more in depth, by taking into account that tail effects of the financial crisis are still there.

1.3

Table 3: Top countries for registration of foreign funds by region outside Europe in 2010

Region

Top country for registration of foreign funds in the region

New registrations of foreign funds in the country in 2010

Total registrations of foreign funds in the country as at 31/12/2010

Total registrations of foreign funds in the country as at 31/12/2007

Africa

1. South Africa

-16

214

112

Americas

1. Chile

-175 -263

1,262 2,064

1,213 1,824

Asia Pacific 1. Singapore

Middle East

1. Bahrain

-62

739

908

Source: PwC, 2011 and 2008

Distribution of UCITS funds in the Asia Pacific regions has been central and much talked about over the years. A cross-border distribution study by Lipper dating back to 1995 already stated that Hong Kong was the UCITS target of choice outside of the EU as it was a central point from which to hit many different Asian markets, at the time not yet open to distribution of foreign funds, or not at all open to the fund industry 25 . More than fifteen years later, the picture has not changed much. Certainly, there are today more UCITS distributed in Singapore than in Hong Kong, but both countries are high prio- rity as they act as hubs for distribution in Mainland China and other, less developed Asian fund markets; Hong Kong still being the frontrunner. Nonetheless, despite UCITS funds still having to go through a lengthy full registration procedure to be able to be marketed in Hong Kong, and given the brand power of UCITS, more and more Asian local regulators recognise the product and facilitate its penetration in local markets. Hence, preserving their confi- dence in the UCITS structure is critical to future success. Macau is a recent success story: UCITS sold in Macau increased by 56% in 2010, to reach 906 registrations.

Distribution of UCITS funds in the Asia Pacific regions has been central and much talked about over the years.

24 Source: PwC, Taking Luxembourg as a proxy, cross-border UCITS marketed in Europe were accounting for 85.2% of the total cross-border UCITS in 2008 and are now up to 86.3% at the end of 2011. 25 Source: Lipper, “Cross-border marketing”, 1995

Cross-border distribution of UCITS | page 29