Addressing an audience and panel of experts via video at Citywire’s recent Berlin fund forum, EFAMA Chairman Jean-Baptiste de Franssu warned that with ne
Addressing an audience and panel of experts via video at Citywire’s recent Berlin fund forum, EFAMA Chairman Jean-Baptiste de Franssu warned that with newcits the industry was at risk of creating a ‘monster’. De Franssu began his address by pointing out that whilst the ‘newcits’ trigger point started in 2005 when more and more alternative strategies adopted the UCITS wrapper, it was in 2009 that real acceleration was seen as hedge funds faced up to the end of private placement rules as they existed. De Franssu said that there was fundamentally an ambiguity with the concept of ‘newcits’ as nobody knew where it started from or where it would take us and went on to highlight what he considered to be a number of key risks. These included distribution, given that there are no such rules in Europe, as well as a range of compliance, counterparty and operational risks. Said de Franssu: “These are important aspects that people don’t spend enough time discussing and trying to address.” The newcits ‘monster’ that was about to be created was, he believed, in response to the vacuum created following the eligible assets directive of 2005. “Maybe we as an industry have not been quick enough to address that vacuum,” added de Franssu, who said that steps must now be taken and that people stop talking about newcits for the benefit of investors, and the industry as a whole. “We have a collective responsibility,” said de Franssu. Panellists responded by saying that if there were a danger of UCITS rules pushing investors into risky waters, the onus should lie not with fund managers but with the UCITS rules themselves. An audience vote revealed that 30 per cent agreed with de Franssu, 43 per cent disagreed and 27 per cent were undecided.
