Shedding Light on Non-Financial Risks – a European Survey

Shedding Light on Non-Financial Risks – a European Survey — January 2012

5. Limitations of Regulation and Alternative Solutions

Figure 5.2.1: In UCITS IV, the responsability of depositaries and investment firms depends on countries. In UCITS V, and in the transaction to UCITS of depositary duties described in AIFM, the responsability of restitution of assets of UCITS funds and the feasibility of the restitution will be questioned. In that context:

Figure 5.2.2: Country group average of secure UCITS In UCITS IV, the responsability of restitution of depositaries and investment firms depends on countries. In UCITS V, and in the transposition to UCITS of depositary duties described in AIFM, the responsability of restitution of assets of UCITS funds and the feasibility of the restitution will be questioned. In that context:

“Fr” is France, “UK” is the United Kingdom, “Ge+Au+Nl” is Germany, Austria and the Netherlands, “Lux+Irl” is Luxembourg and Ireland, and “RoE” is the rest of Europe. Answers are coded in the following manner: -2 for Strongly disagree, -1 for Disagree, 0 for Unsure, 1 for Agree, 2 for Strongly agree.

that were initially assigned to that product (transparency, protection, liquidity, and not even the fact that UCITS funds are supposed to be retail funds). Specific product regulations could ensure that the characteristics of products respond to pre-defined needs or risk constraints, and we investigate the interest for a subset of UCITS with clear protection on restitution and greater guarantees to investors on non-financial risks. A “Secure

UCITS” label would be more transparent for retail investors, while more sophisticated investors would still have the means to invest knowingly in more risky products. The proposed definition is that depositaries would be unconditionally responsible for the restitution of assets within this denomination of funds, whether this obligation of restitution and the framework would constitute a legal definition or more simply a recognized contractual one. The main difference between these

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An EDHEC-Risk Institute Publication