Italy not ready for Ucits IV

The Italian funds industry is not ready to meet the upcoming challenge of Ucits IV, says Giorgio Girelli, chief executive of Banca Generali, one of the largest banking groups in Italy

Radical reform is needed if the Italian funds industry is to compete at European level, with Ucits IV due to be implemented in July, Girelli says. The problems facing the Italian funds industry include a distribution system dominated by the banks, which prefer to sell their own products; a heavy taxation regime; and a continued resistance by fund selectors to adopt the open architecture system.

Ucits IV may promise to ‘revolutionise’ the funds industry in Europe, but it is rarely discussed. Girelli said: “It is strange because our funds industry could be disadvantaged. But without a change in the law, there will be no developments.” One result of this would be that these banking groups would hinder the process of integration of the European financial markets.

Ucits IV will authorise all European fund providers to distribute their funds across Europe, without reference to local regulators. Girelli fears that the current Italian tax system will handicap the Italian funds industry. Italian funds are taxed on the fund’s returns, rather than on profits taken by the investor. He adds that foreign fund managers also have been unable to build a significant market share in Italy.

Open architecture has not been widely adopted, even outside Italy, says Girelli. Banca Generali was one of the first to introduce open architecture in Italy. In June 2009, the bank signed distribution agreements with BlackRock, Credit Agricole, Morgan Stanley, Invesco and Vontobel. The bank now has 19 agreements in place, with more to come in the next few months.

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