James Williams, Hedgeweek

MENA welcomes first UCITS-compliant fund platform… concerns that bonus cap could be introduced under UCITS V…

These are potentially worrying times for Europe’s fund managers with the threat of a bonus cap hanging over their heads. In the UK, investment bankers are to have their bonuses capped at twice the level of their salaries, the Financial Times reported recently. This could potentially result in portfolio managers working for asset management houses owned by banks or hedge funds also getting hit by caps. Last month, Lord Adair Turner, the chairman of the UK’s Financial Services Authority, said that the bonuses of portfolio managers should be conditional on performance over a number of years. Already, under the EU’s Alternative Investment Fund Managers Directive, which is due to go live in July 2013, alternative investment managers will need to defer 40 to 60 per cent of their bonus.

Peter de Proft, director-general of the European Fund and Asset Management Association, was pretty clear in his thoughts by saying: “The debate is over. What is happening in the banking industry is being transposed to the fund management industry.” Whether people that fund managers’ bonuses should be cap in line with bankers is very much open to debate but the signs do look ominous. The fear is that bonus caps could come into effect when UCITS V arrives in 2015.

Long-term UCITS net sales surged to EUR53billion in January 2013
according to the latest factsheet produced by the European Fund and Asset Management Association (EFAMA). This figure compares to EUR35billion of net inflows in December. Overall, UCITS saw a huge jump in net inflows in January to EUR49billion, compared to just EUR1billion in December, largely as a result of this surge in long-term UCITS allocations. Equity funds continued to garner favour, with net inflows reaching EUR21billion on the back of EUR14billion in December. Bond funds were also up slightly to EUR19billion from EUR14billion in December.   

Bernard Delbecque, Director of Economics and Research at EFAMA
, commented: “A perceived reduction in global stock market uncertainty supported by stronger financial market confidence strengthened investor sentiment in January, leading to the best month for net sales of long-term UCITS since EFAMA began collecting monthly data in October 2008.”

In other news, EFAMA has warned that European savers and investors face a grave danger if the proposed Financial Transaction Tax (FTT) is introduced by the European Commission. EFAMA has estimated that if the FTT had been introduced at the start of 2011, EU savers in UCITS would have paid EUR13billion of FTT annually.

This is hardly helpful at a time when governments need to do more to encourage people to save more long-term and build their own pension pots. EFAMA also points out that investors would have paid EUR4billion on the redemptions of UCITS shares, and that EUR9billion would have been levied on the sales and purchases of securities by UCITS fund managers.

With liquidity being one of the main advantages to UCITS funds, giving managers and investors alike the ease to dip in and out of markets quickly and efficiently, the prospect of an FTT could have huge long-term repercussions.

Peter de Proft, director general of EFAMA
, was quoted as saying: “EFAMA is extremely concerned about the detrimental impact of the new FTT on investors in funds including retail investors and savers participating in pension plans and the European economy, especially those of Member States within the FTT-zone.

EFAMA strongly opposes an FTT which will result in fund investors paying the tax (at least) twice, and which will drastically reduce the attractiveness of saving through funds and pension plans. This result would be wholly unjustified in the light of the important social role investment funds play, and the global reputation that UCITS has acquired as a model of excellence in the long-term savings market.”

Dutch law firm Loyens & Loeff announced recently that its client Al Masah Capital Limited (AMCL), a leading Dubai-based investment firm, has, with its help, established the first UCITS-compliant fund platform in the MENA region, reported website AMEinfo.com. Shailesh Dash, Founder and CEO of AMCL, said that this would establish AMCL at the “vanguard of the fund revolution” taking place in the region. The investment management teams of Loyens & Loeff in Dubai and Luxembourg advised the firm on the structuring and operational setup of the new platform with Dash quoted as saying: “We have been able to meet our investors’ highest quality standards by setting up this fund platform with the assistance of leading law firm Loyens & Loeff.”  

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