November 2013 - The European fund industry in November

European fund news in November

European parliament endorses regulation on key information documents

On 20 November, the European Parliament endorsed the draft text of the amendments to the European Commission's proposal for a regulation on key information documents (KIDs) for packaged retail investment products (PRIPs).

Primarily for retail investors, the objective of KIDs is to enable investors to easily understand a product and to compare the possible risks and rewards of the product with others.

KIDs will cover a much wider range of investment products than the existing KIIDs, or key investor information documents, for UCITS funds. However, there are a few exceptions such as insurance products that do not offer a surrender value, deposits, individual securities and social security schemes.

The text of the draft regulation includes a proposal for an online fund calculator allowing investors to check the information on costs and fees given by fund managers.

Parts of the regulation with greeted negatively by the fund industry, in particular the proposal for a “complexity label” and the inclusion of certain insurance products.

A final text is expected next year.

ESMA and EBA consult on complaints handling

ESMA, the European Securities and Markets Authority and the European Banking Authority have launched a consultation on their draft guidelines on complaints handling for the securities and banking sectors.

The paper is addressed to, among others, UCITS management companies and UCITS investment companies and external alternative investment fund managers. The objective is to allow EU consumers to refer to a single set of complaints-handling arrangements, irrespective of the type of product or service or the geographical location of the firm in question.

The deadline for submissions is 7 February 2014 and ESMA and the EBA expect to publish the final guidelines in the first quarter of 2014.

UK regulator to overhaul fund charges

At the end of October, the Financial Conduct Authority (FCA) called for greater transparency for fund charges during its annual asset management conference in London.

The FCA intends to address the concern that some asset managers may be using client commissions to cover costs that are not purely related to research.

As a result of these concerns the FCA has launched a consultation on the use of dealing commissions. Its proposed changes are designed to ensure investment managers make appropriate judgements and control costs on behalf of clients when using dealing commission to pay for goods and services.

The consultation will close on 25 February 2014 and a policy statement will be published in spring 2014.

Luxembourg authorises first RQFII fund

On 13 November, it was announced that the Luxembourg supervisor had authorised the first Renminbi Qualified Foreign Institutional Investor (RQFII) fund under the UCITS scheme.

The fund can invest 100% of its net assets in China A-shares through the use of the RQFII quota to be granted to its manager by the competent Chinese authorities. There have been authorisations of other funds investing in China but this is the first UCITS to be able to invest all of its assets under the RQFII program.

The RQFII UCITS scheme is particularly interesting for foreign fund managers using Luxembourg as their platform to distribute UCITS on a cross-border basis.

ALFI guidelines on subscription and redemption orders under AIFMD

On 25 November ALFI, the Luxembourg fund association issued a position paper on the treatment of subscription and redemption orders under AIFMD.

This document contains an assessment of the current market practice from the perspective of global cross-border fund servicing of Luxembourg-domiciled funds.

It is not meant to impose an industry standard but is a guide to best market practice to comply with Commission Regulation (EU) N° 231/2013.

New fund industry publications

ALFI was particularly busy during the month with publications on:

• A FAQ on the European Markets Infrastructure Regulation (EMIR) and OTC derivatives

• Three brochures on hedge funds and vehicles for private equity and real estate

• The 2013 version of its annual real estate investment fund survey.

Additionally, EY released the 2013 edition of its global hedge fund and investor survey.

State Street published a study on big data and asset managers, entitled “Leader or Laggard? How Data Drives Competitive Advantage in the Investment Community”.

Fundsquare News 4 - November 2013