MAKING THE MOST OF UCITS IV

Master-feeder structures

Key features

Content of the agreements

• The information-sharing agreements between custodians and au- ditors (if different) respectively must be concluded in order to define and ensure successful performance of each party’s obligations.

The key characteristics of the agreements are as follows:

• The agreement between the feeder UCITS and master UCITS must set out the rules governing access to information, the principles for the subscription and redemption of units by the feeder UCITS, the typical provisions regarding distribution and events affecting such provisions, the provisions relating to the calculation and publication of the net asset value in order to avoid market-timing, together with the choice of applicable law. • The internal conduct of business rules (if applicable) must include, in summary form, the information indicated above and must also provide for measures limiting the conflicts of interest that may arise between feeder UCITS and master UCITS.

Applicable law The applicable law must be specified in each of the agreements;This may be the law applicable to the master UCITS or that applicable to the feeder UCITS. Provision of information to share/unitholders All information provided to investors in the feeder UCITS must set out clearly the consequences of an investment in the master UCITS in terms of fees as well as investment policy.

Points of attention

Main questions that clients should address

• As far as possible, the operating characte- ristics of the feeder UCITS must take ac- count of those of the master UCITS (for example: Frequency of NAV calculation, closing date of accounting year, cut-off time for subscriptions/ redemptions, etc.). • The choice of different custodians and/ or auditors between master UCITS and fee- der UCITS is a factor of significant complexity. It must therefore be fully measured, as the risks, obligations and responsibilities of each party can fluctuate and differ from one Member State to another. • The choice of law applicable to the agreements is key, and must be assessed in accordance with the specific characteristics of the Management Company and/or UCITS.

What are the advantages of the master-feeder structure over other proposed solutions regarding international distribution?

How should the master-feeder structure be used to create new sales opportunities and/or synergies and economies of scale?

In which Member States should master-feeder UCITS be domiciled? What criteria should be included in the choice of location for these structures? Have the main issues relating to the setting up of a cross-border master-feeder structure (legal, operational,marketing, tax-related, cost, etc.) been identified? How should the respective obligations of the feeder UCITS and master UCITS be managed? What assistance are Management Companies able to get from their usual service providers on this subject? What has their experience been? Have they already had experience with master-feeder structures?