Funds Hub
Money managers under the microscope
Lipper: Fighting fragmentation
By Merieme Boutayeb, Research Analyst at Lipper. The views expressed are her own.
The European investment funds industry has been reshaped over the last 25 years by EU directives designed to improve efficiency, strengthen competitiveness and boost distribution. However, the latest battle to reduce fragmentation of the industry is looking like a hard one to win.
The first UCITS (Undertakings for Collective Investment in Transferable Securities) directive was created in 1985 with the aim to lay the foundations for a single European retail market.
Faced with regulatory gaps and other flaws, it had only limited success and a second attempt was initiated in the early 1990s, only for that project to be aborted due to major disagreements between member states.
Thereafter, a real effort of coordination and communication by the member states allowed the UCITS III Directive to emerge in 2001, the implementation of which has been an important milestone in the history of the European investment funds industry.
We have witnessed the beginnings of a unified regulatory platform, enhanced protection for retail investors and an expanded range of products and strategies.
Nevertheless, the European fund market still suffers from fragmentation, which penalizes the performance delivered to investors. Relatively lower levels of assets under management make it difficult to benefit from economies of scale.
Morning Line-Up: euro losses, Tories, Ucits
News and views on the asset management industry from Reuters and elsewhere:
Hedge funds hurt by bets against euro – WSJ
The $1.8 mln apartment and Ivy League fiancee of hedge fund manager accused of insider trading – Daily Mail
Are hedge fund managers the Tories’ trade unionists? – BBC blog
Ucits hedge funds struggle to raise assets under management over 100 mln euros – Hedge Funds Review
Dare you buy a fund from your bank? – Telegraph
Morning Line-Up: Madoff trustee sues HSBC; Allsopp returns to Africa
News and views on the asset management industry from Reuters and elsewhere:
Fund tracker EPFR Global sold to Informa - Reuters
Madoff trustee sues HSBC for $9 billion in US court - Reuters
Allsopp tries again with Insparo Africa fund- FTfm
UCITS attract 46 bln euros in inflows for Q3 - HedgeWeek
HK official dismisses reports of hot money inflows - Reuters
INSIDER-GLC launches two new UCITS strategies
GLC CEO Caroline Hoare tells Reuters Insider the hedge fund plans to launch two new UCITS-compliant vehicles to draw in new investors.
A mixed picture
Results from fund firms GAM and Jupiter this morning provide some interesting insights into the different drivers of the hedge fund industry.
GAM, which saw profits tumble last year as clients pulled out of its hedge funds, recorded net inflows into these portfolios for the first time in two years, showing that, despite market volatility and investor caution, there is money out there looking for a home and that a firm can still reverse its fortunes in this climate.
Jupiter, on the other hand, saw net inflows across its mutual funds but suffered a net 36 mln stg outflow in the first half from its hedge funds, showing that some funds are still losing hedge fund assets despite overall industry inflows.
There are plenty of drivers of flows in the industry at present – money has been coming in slowly, but generally to the bigger, better-performing firms, helped by the industry’s increasingly institutional client base. Meanwhile, Ucits funds provide a potential boost to the industry, but are they simply cannibalising offshore hedge funds’ assets?
Jupiter CEO Edward Bonham Carter said this morning that the firm’s absolute return business had grown to three times the size of the hedge funds unit. “Effectively our hedge funds business has moved onshore and this is where we see the future of our hedge fund strategies.”
Morning Line-Up: Dana, TPG, Ucits
News and views on the fund industry from Reuters and elsewhere:
Hedge funds to win big as Koreans close in on Dana – Reuters
Ucits pioneer warns of glut – Financial Times
Can Ucits help the struggling fund of hedge funds industry?
Funds of hedge funds have had a hard time since the onset of the credit crisis, what with the Madoff scandal, widespread gating and sidepockets and underperformance versus single-manager hedge funds in 2008 and 2009.
However, Ucits — onshore funds viewed as more transparent and more liquid — have been widely seen as a fresh injection of capital into the hedge fund industry and could prove a much-needed boost for funds of funds looking for a new client base to tap.
Find out Credit Suisse’s views in this Reuters Insider interview with fund manager Salvatore Cordaro.
Morning Line-Up: ‘Cruz missile’, Marshall Wace, USS
News and views on the asset management industry from Reuters and elsewhere:
‘Cruz Missile’ takes off with new fund – WSJ
Marshall Wace investors poised to wind up listed fund – FT
Cautious on equity hedge funds – WSJ
USS pension fund expands its internal investment team – Financial News
80 pct of FoHF managers considering Ucits wrapper, says KDK – Hedgeweek
JPMorgan launches Ucits fund of absolute return hedge funds – Hedgeweek
UCITS IV Everyone
It is early days at the Reuters fund summit in Luxembourg, but already a few themes are building. For one thing, no one seems to be too negative about the investment climate.
For the most part, however, the attendees are focused on how the industry will recuperate from the battering it has suffered during the financial crisis. Again, there appears to be a degree of optimism. Most of the talk is about UCITS IV, which is fundspeak for a new kind of pan-European fund that is easier to distribute.
Essentially, it a) allows fund managers to register a fund in one place and have it listed across Europe and b) allows for smaller, local funds to be fed into it.
The big hope is that this will both build the industry and save money at the same time. Hence the optimism.
It does little, however, to address the underlying problem facing fund managers — to get distrusting retail investors back into a market that many are still afraid of.
