MAKING THE MOST OF UCITS IV

Client profile & objectives

• Domestic requirements and characteristics, such as political and tax barriers, cultural reasons and investors’ appetite for domestic products.

You are an internationally active Management Company already esta- blished in various EU countries, with one or several UCITS structures per domiciliation country. You have also set up one local Management Company per fund domicile across Europe. You now face the issue of activity dissemination in various European jurisdictions and product duplication under different labels, forms and legislations. In an ideal world, your portfolios would be precisely tailored to the risk/reward profile of each type of investor with no need to duplicate structures because of tax or regulatory barriers. To date, attempts to achieve this ideal have rarely been successful. Those fund sponsors who have tried to fine-tune their offerings have often found them- selves with a large number of very small portfolios which cannot be managed cost-effectively. On the other hand, sponsors or asset managers who have resisted a customised approach have usually been left with a small number of larger portfolios which are only well-suited to a limited market segment. Indeed, at product level, situations occurred where there was a need for maintaining a certain degree of plurality or diversity in the vehicles used, being for regulatory, tax or marketing reasons lying on the distri- butor/investor side, such as: • M&A processes by which you have inherited a similar product range, difficult to merge into your existing platform because it is located in another jurisdiction or offered under specific branding to a distinct distribution network; • Product characteristics that were non-compliant with previous UCITS directives and that required you to launch various regulated local non-UCITS platforms; • Regulatory constraints that entailed, for time-to-market reasons, the set-up of a domestic product rather than capitalising on your flagship and the distribution facilities offered under UCITS; • Negotiating power of some of your distributors/clients who have im- posed their branding;

Because of this product proliferation in many European countries, you have been obliged to put in place an oversight model with a presence in these countries, as imposed by the previous UCITS directives. As a consequence, you may find it difficult to have a global picture of your distribution network, and the multiplicity of local transfer agency models and providers tends to hinder your capacity to implement an efficient in- centive policy. Objectives As you have already developed significant business both at European and international levels, you mainly intend to use the UCITS IV toolbox to ra- tionalise your product ranges and improve your oversight and distribution processes, rather than for product development.You also intend to reduce your costs by finding economies of scale at the fund management level. At the same time, you obviously want to preserve your current client base and development strategy. To reach your fund range rationalisation objectives, you may choose between two different tools under the new directive or mix between them: • Using cross-border mergers to reduce the number of funds and centra- lise asset management in one key country in EU. • Using master-feeder structures - independently or in conjunction with fund mergers – in order to exploit economies of scale, limit fund fees and increase the size of your structures. Besides, the Management Company passport could allow you to li- mit the number of Management Companies you have and thus avoid having one entity per fund domicile. If you also have non-UCITS funds in your range of products, potentially supervised by the same Management Possible scenarios

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