Cross-border sales set to increase, says Luxembourg Association

Research from the Association of the Luxembourg Fund Industry (ALFI) points to growing cross-border fund distribution across Europe in future.

As far as the great European harmonisation project goes, cross-border distribution of funds has been slow to set the industry alight, despite regulatory moves such as Ucits IV.

There has been some growth: from about 3,300 cross-border funds in 2001 to about 8,500 by the end of 2011, according to Lipper and PricewaterhouseCoopers data. But this suggests that there are still several tens of thousands of funds not regularly sold across borders.

However, the picture is set to change more rapidly in the next few years, according to the findings of an extensive study into cross-border distribution trends, commissioned by the Association of the Luxembourg Fund Industry (ALFI) and conducted by research firm Spence Johnson. The research was presented at the recent ALFI Global Distribution Conference in Luxembourg.

This faster growth in numbers of cross-border funds rests on more widespread use of the ‘tools’ already available to managers through the latest Ucits regulations, particularly master-feeder structures, management company passports, and greater ability to merge smaller Ucits funds into larger funds.

Fund companies will face increasing demand for resources to facilitate their cross-border trade, as well as hurdles such as the non-harmonised fiscal rules in individual EU member states. However, the tools mentioned are set to not only increase the number of markets served per management company, but also possibly increase the importance of both Dublin and Luxembourg as fund centres in Europe.

Some 60 asset managers and service providers were approached as part of the research. On average, they serve 18 markets, predicted to rise to 22 by 2015. The master-feeder structure, along with company passports, is expected to be in use by most asset managers in three years’ time.

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