MAKING THE MOST OF UCITS IV

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Implementation considerations & points of attention

NOTIFICATION PROCEDURE, KIID PRODUCTION & MAINTENANCE AND LOCAL DISTRIBUTION RULES Once you have defined the target markets for your funds (domestic or cross-border range), you will have to face additional challenges to imple- ment your distribution strategy. First of all, you will have to request the registration of your fund(s) in the target countries of distribution.As a Ma- nagement Company already established in a EU country, you will benefit from the UCITS IV simplified notification process, designed to increase cross-border registration efficiency, streamline the cross-border authori- sation process across EU Member States and provide a shorter time to market. However, it should be noted that you will still have to comply with local marketing and distribution laws in the host Member State .As such, you might have to cope with various local distribution requirements if you intend to market your fund(s) in several countries. Producing and distributing the Key Investor Information Document (KIID) will be a real challenge for Management Companies as it is the only compulsory measure introduced by UCITS IV , along with the upgrading of Management Companies with MiFID rules. Furthermore, the KIID will have to be translated into the language of the country of dis- tribution and any material change within the fund will require prompt re- vision of the document. It will inherently necessitate a timely notification to all regulators where the fund is registered for cross-border distribution and throughout its distribution network. Outside the EU, the KIID might not be recognised by local authorities such as in Hong Kong and Singapore, where you will have to produce other “KIID-like“ documents (e.g. KFS, PHS). The KIID will be an inescapable pillar of UCITS IV. • Have you already considered the cost and time-consuming aspects induced by its implementation and maintenance? • Do you have the right capabilities to produce, update on a frequent basis and deliver this new document to distribu- tors and investors? It may be worth considering outsourcing all or part of the KIID drafting and maintenance to a reliable service provider such as CACEIS.

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Depending of your preferred scenario, the following implementation issues will have to be raised:

Challenges related to cross-border distribution of funds

DISTRIBUTION STRATEGY The first challenge is identifying the right target markets to success- fully sell your funds cross-border. You will have to carry out a cost/ benefit analysis, as well as a thorough market survey to understand the key specificities of each market. The main questions you should ask yourselves are: Is there a local appetite for non-local products in the target countries? Is the domiciliation of our domestic UCITS fund suitable for distribution in the target countries? Would we be better off launching a new UCITS in another domicile to reach these markets? In this case, for which investors and how can we maintain our track record? Which fund distribution channel should be favou- red? How can we develop our distribution network in the target countries? In these aspects, regulatory changes should be carefully monitored. Thus, in the UK, the FSA’s new Retail Distribution Review (RDR) re- gime, which was designed to add further protection for retail inves- tors and is expected to operate from 2013, will undoubtedly change the way the market is structured and operated for retail investments. The RDR will affect any fund that is distributed to retail investors in the UK and change the relationship between retail fund providers, their main distribution channel – UK advisers (IFAs) – and product consumers. You will have to define a precise distribution strategy and have a clear view on which products are going to be marke- ted in which country through which distribution channel.This will require a strict selection and monitoring of the distribu- tors you are going to involve in your fund distribution.

CACEIS - UCITS IV |  page 9