Fund industry groups were largely in favour of a raft of new investor protection rules to come out of Europe this week.
The European Fund and Asset Management Association says clients’ assets will be safer as a result of rules in the newly passed Ucits V directive that require every Ucits fund to appoint an independent depositary.
The Association of the Luxembourg Fund Industry says “investors can look forward to increased protection” thanks to the new Ucits text and agreements by the European Commission on the second Markets in Financial Instruments Directive (MiFID) and packaged retail and insurance-based investment products (PRIIPs).
Meanwhile, asset managers are pleased the Ucits rules have been clarified before the EU elections in mid-May, in which “an influx of new MEPs could have risked a time-consuming re-run of the debate”, says Paul Stratford, director in wealth and asset management at consultancy EY.
“Now at least managers know what they have to grapple with,” he says.
Not all the new rules are popular, though, with controversy settling over new Ucits rules on fund manager pay, adapted from the Alternative Investment Fund Managers Directive (AIFMD). The rules say at least half of fund managers’ variable pay must be paid in assets of the Ucits fund they manage and 40% of the variable pay must be deferred for three years.
Pierre Bollon, director general of the AFG, the French funds industry association, says the pay provisions “unfortunately go beyond the requirements of the AIFMD, in particular the rules applying in case of a delegation of the portfolio management function to a third-party”.
Meanwhile José Luis Jimenez, chairman of the Group of Boutique Asset Managers, says these restrictions discriminate against small and medium-sized asset managers, which cannot afford to pay large base salaries and rely on variable pay to incentivise good staff.
“The efforts of the European parliamentarians will have the opposite impact to what they seek,” he says. “It will damage competition, hasten the end of the adoption of Ucits outside Europe, and leave the end consumer worse off.”
Asset managers now await implementation guidelines from the European Securities and Markets Authority (ESMA), with EY reporting that most managers plan to start impact assessments on the Ucits rules at the start of 2015.
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