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EU says Ucits rules hamper fund sector

An EU green paper has str- ongly criticised the state of the Ucits regulations but has ruled out an immediate overhaul of the regime.

The paper – part of an on-going review of cross-border funds headed by EU internal market commissioner Charlie McCreevy – says Ucits regulations do not allow the full potential of the industry to flourish, nor are they flexible enough to cope with the challenges of changing markets.

Despite this, the paper says there is not yet a compelling case for fundamental legislative overhaul of the regime and that the EU should focus on exhausting the possibilities offered by the current legislative framework instead.

McCreevy also rebuffed calls for tighter regulation of the hedge fund market.

Ucits regulation aims to provide a passport for investment funds across the EU once they are authorised in one member state. Since 2000, the number of Ucits-passported funds has more than doubled.

The report says the Ucits landscape remains domin- ated by funds of sub-optimal size, with European funds on average five times smaller than their US counterparts, and that this is reducing net returns to end-investors.

The IMA welcomes the paper, saying it will lead to reducing the costs of cross- border funds. It says it will continue to support proposals to improve things as quickly as possible.

IMA deputy chief executive Sheila Nicoll says: “The investment fund industry in Europe is frustrated by barriers to cross-border business, with the additional costs to managers and investors that those barr- iers bring. Simplifying the process, allowing funds to be merged and avoiding dup- lication will go a long way to achieving significant economies of scale.”

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Type: Oeic

Aim: Growth of 2% above Libor by investing globally in exchange traded funds

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Pep transfers: Yes

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