RETHINKING DISTRIBUTION

“Europe has created a global standard in Financial Services and has the opportunity to leverageon it especially after the financial crisis. Five years ago, when our global Asset Management teamwas meeting Asian regulators, a majority of the questions were posed to our US partners, now they are asked to our European team.”

Looking forward: Howwill EU domiciled funds be able to maintain their dominance in Global Fund Distribution? UCITS funds have already managed to successfully enter international markets but theymay face increased competition from emerging markets in the future. Therefore, the following questions may be raised: • It is natural to assume that, sooner or later, the domestic asset management industry of the emerging economies will either want to expand their operations or control their level of access to foreign investors, including those in the EU. However, can we really expect that European asset managers will have to compete with emergingmarket players in both emerging markets and in Europe? • Given the global desire for increased exposure to growth in emerging markets, can emerging market players develop a global rival to the UCITS brand, and if so, what is a realistic timeline for this to occur within, if at all? • As seen throughout economic history, emerging economies rely on protectionism to develop and strengthen their domestic industries before allowing foreign entrants. What options does the EU have to mitigate this risk? How should European funds maintain and develop their penetration in emerging markets?

Marc Saluzzi – PwC Luxembourg, Financial Services Leader

The success of the UCITS brand

Since its creation in December 1985, UCITS have managed to build an international brand recognition. According to PwC’s GFD Poster, as at end 2010, 13% of cross border registrations occur outside Europe, with 77% of these registrations being from Luxembourg domiciled funds. Market data suggest that between two-thirds and three-quarters of all existing offshore funds distributed in Asia are structured as UCITS and that 90% of all new offshore funds sold in the region are UCITS. Asian investors could account for 20% of total UCITS assets [7] .

[7] According to Terry Pan, Managing Director and Head of Hong Kong Business at JPMorgan Asset Management , in Global Investor Magazine, December 2010

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