MAKING THE MOST OF UCITS IV

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Challenges related to cross-border distribution of UCITS

DEPOSITARY FUNCTION Regulation will require you to appoint a depositary for your UCITS pro- duct, which will need to be located in the country of domiciliation of your fund. FUND ADMINISTRATION AND TRANSFER AGENCY The choice of your cross-border fund administration and transfer agency centre will be crucial to your project’s success, due to the extensive exper- tise and more sophisticated approach required in a cross-border environ- ment. Furthermore, replicating an alternative investment policy in a UCITS vehicle will imply, in most cases, the replacement of management tech- niques such as short selling or leverage effect by sophisticated derivatives, for which a reliable position keeping and pricing function will be required. Domiciling your EU Management Company, as well as the transfer agency and fund administration, in the country of domiciliation of your UCITS will be the more efficient servicing structure, except for specific constraints (e.g. fiscal). It will notably enable you to work with a single regulator. Appointing a full service provider (fund administration, transfer agency, depositary, support to distribution, third-party Management Company) already set up in a cross-border UCITS distribution centre and highly experienced in the UCITS market would allow you to benefit from a comprehensive package of services,save both time andmoney,gain efficiency and ensure you are fully compliant with the new environment you are entering (in particular in terms of risk and oversight management, the Management Company having to be compliant with MiFID rules).

As already described in the previous client profiles, you will have to face a number of issues when marketing your UCITS around the world. DISTRIBUTION STRATEGY The first challenge will consist in identifying the right markets to target to successfully sell your funds cross-border.

You will have to carry out a cost/profit analysis, as well as a thorough market survey and understand the key specificities of each market.

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Main questions you should ask yourselves are: Is there a local ap- petite for non-local products in the target countries? Is the domi- ciliation of our UCITS fund suitable for distribution in the target countries? For which investors? Which fund distribution channel should be favoured? 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) regime, designed to add further protection for retail investors and expected to operate from 2013, will undoubtedly change the way the market for retail investments is structured and operated. The RDR will affect any fund that is distributed in the UK to retail in- vestors and change the relationship between retail fund providers, their main distribution channel – UK advisers (IFAs) – and product consumers.

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