MAKING THE MOST OF UCITS IV

Profile 5

your UCITS is 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 and money, gain efficiency and ensure you to be 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).

MANAGEMENT COMPANY You could either create your own EU UCITS IV compliant Management Company or more likely appoint a UCITS compliant third-party Ma- nagement Company having the substance, the staff and adequate tools. Among the issues to examine are MiFID rules applying to all Management Companies as of 1st July 2011, new delegation arran- gements, new monitoring tasks and reporting flows to implement. You will have to decide whether you intend to insure risk management and the compliance controls by yourselves or if you prefer to delegate these activities to an expert service provider, owing to the extensive know-how they require. Taxation will also be a key issue. New tax risks and additional complexity could emerge if the Management Company and the service providers are not located in the country of the UCITS but it should be balanced with the benefits of the increased flexibility gained through a consolidated cross- border management business model. DEPOSITARY FUNCTION Regulation will require you to appoint a depositary for your UCITS pro- duct, who will necessarily 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 the success of your project, due to the broad ex- pertise and more sophisticated approach required in a cross-border envi- ronment. Furthermore, replicating an alternative investment policy in a UCITS vehicle will require, in most cases, the substitution of management techniques such as short selling or leverage effect by sophisticated deri- vatives, for which a reliable position keeping and pricing will be required.

Challenges related to cross-border distribution of UCITS

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As already described for 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. 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 UCITS fund suitable for distribution in the target countries? For which in- vestors? Which fund distribution channel should be favoured? How to develop our distribution network in the target countries? In these aspects, regulatory changes should be carefully watched. Thus, in the UK, the FSA’s new Retail Distribution Review (RDR)

Domiciling your EU Management Company, as well as the transfer agency and fund administration, in the country of domiciliation of

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