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Fund managers face regulatory challenges, says Northern Trust


Northern Trust says that if investment managers are to navigate the intricacies of pending new European regulations they cannot look at each regulation in isolation.

This, according to Northern Trust’s latest white paper Funds regulation: A brighter distribution future? is vital to ensure investment managers are well positioned to take advantage of the potential for increased ease of distribution across Europe.

"Europe’s supervisors are looking for ways to get more investors involved in the market and to keep them involved, while providing a framework for improved governance," says Wilson Leech, head of Northern Trust’s global fund services business.

"The challenge for the regulators is to ascertain the appropriate level of oversight so that the market becomes more and not less efficient. The challenge for investment managers is to understand the impact the regulations will have on their business and their investor base and the overhead required to support and implement these. Whether managers are based in Europe, the US or Asia Pacific, these regulations may impact how they do business so they need to be prepared.”

The Undertakings for Collective Investment in Transferable Securities IV Directive, the UK’s Retail Distribution Review and the European Union’s Alternative Investment Fund Managers Directive are three significant regulations impacting the funds industry due to converge in 2012.

"While there are notable challenges involved in Ucits IV and RDR the result should be positive for fund managers in terms of driving distribution. Ucits IV takes the principle of harmonisation further through the ability to create a master feeder fund, and passport a fund management company (meaning managers will have the opportunity to have one pan-European Ucits management company, rather than one in every jurisdiction), while the RDR will remove the commission structure allowing more funds to invest in the UK marketplace," says Karen Hamilton, head of product development for fund administration at Northern Trust.

"The AIFM Directive is the newest piece of legislation facing the funds industry and is the most controversial. There are still significant areas where the industry is seeking greater clarification so investment managers should not make any sweeping changes until it is clear what the directive will entail," she adds.

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