UCITS IV: Implications for the Asset Management Industry in Europe

The UCITS IV Directive is expected to bring greater harmonization of the European fund management marketplace. The Directive attempts to cover some of the regulatory gaps, and it is expected to boost cross-border fund management in Europe.

In a new report, UCITS IV: Implications for the Asset Management Industry in Europe, Celent looks at the evolution of the UCITS regime, the key provisions of UCITS IV, the UCITS market, and the impact of the UCITS IV Directive on various market participants.

Growth and consolidation are the two emerging themes. There has been a consistent rise in UCITS launches since their inception, and the market is expected to grow, both in Europe and globally. The hedge fund industry is also showing increasing interest in the UCITS product class. The Directive provides opportunities for funds to contain costs through mergers and asset pooling. A marked increase is expected in the number of super funds taking advantage of the provisions of the new directive.

Celent believes that the key contribution of the UCITS IV directive to the asset management industry in the long term will be cost savings. Fund managers may achieve annual savings of €2 billion to €3 billion by making appropriate use of the master feeder structure provision. Modeling suggests that the master feeder structure will save fund managers 10–15% on operations and custody costs.

This report evaluates the key trends, and the challenges and opportunities in the wake of the Directive. It also provides an overview of the Directive’s provisions and their impact on market participants.

“Impact on all stakeholders is expected, though to varying degrees. Fund promoters, management companies, distributors, custodians, depositaries, agents, regulators, and investors will need to adapt to the new ecosystem that UCITS IV will create. In operational terms, the Directive will impose demands for standardized workflows, processes, and systems for all stakeholders,” says Ravi Nawal, Senior Analyst at Celent and author of the report.