Assurance
Asset Management



                                    UCITS IV
                                    Fund Range
...
UCITS IV
Fund Range Rationalisation




Investment managers          Why consider Fund Mergers?              • Considerati...
UCITS IV
                                                                                  Fund Range Rationalisation




...
UCITS IV
Fund Range Rationalisation




  held in ancillary liquid assets,      • If the Master Fund and the             K...
UCITS IV
                                                                                      Fund Range Rationalisation
...
UCITS IV
Fund Range Rationalisation




                             We can help you to determine the        • Assessment ...
UCITS IV
                                                                              Fund Range Rationalisation




• We...
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02115 Ucits Iv Fund Range Rationalisation

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This is the first edition of a new report which we have produced which looks at the global distribution of Irish UCITS funds. Irish UCITS funds are distributed successfully on a global basis.

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02115 Ucits Iv Fund Range Rationalisation

  1. 1. Assurance Asset Management UCITS IV Fund Range Rationalisation PwC contacts: Ken Owens Tel: +353 1 792 8542 Email: ken.owens@ie.pwc.com Andy O’Callaghan Tel: +353 1 792 6247 Email: andy.ocallaghan@ie.pwc.com Pat Convery Tel: +353 1 792 8687 Email: pat.convery@ie.pwc.com “Re-structuring strategies rationalisation on a cross border and potential for cost savings basis. UCITS IV brings forward the from fund rationalisation opportunity for Asset Managers to streamline and optimize their opportunities within UCITS product range to benefit from IV” greater economies of scale and potential tax savings post re- A key component to UCITS IV is structuring. the facilitation of Fund Mergers and Master Feeder Structures within European funds tend to be small the UCITS regime, a welcome when compared with US funds. development with the potential Like many of the other UCITS IV for cost savings and added proposals, it is hoped that allowing efficiencies to the UCITS brand. Fund Mergers and Master Feeder While Fund Mergers were previously Structures will promote economies allowed at national level, the new of scale and greater efficiencies. UCITS IV regime provides for fund First for business. First for people.
  2. 2. UCITS IV Fund Range Rationalisation Investment managers Why consider Fund Mergers? • Consideration of investment performance of merging UCITS The recent market turmoil and need to control short- conditions have highlighted the • Marketability and product history term profit margin many challenges faced by the (sales success to date) industry in terms of significant pressures while decreases in assets under • Fund size & viability of merged preparing for future management and declining profit UCITS margins. Investment managers growth. need to control short-term profit Location Preference: margin pressures while preparing What is the preferred location for the for future growth. In that context, merging UCITS? UCITS IV offers the opportunity for streamlining your Product Portfolio Key considerations:- with the introduction of cross border Fund Mergers. • Fiscal & Taxation considerations; Regardless of the legal form and • Knowledge of & familiarity of local wherever the location within the EU, legal frameworks; UCITS funds should be permitted • Regulatory reputation & to merge. Although subject to responsiveness; certain pre-conditions including prior authorisation by the competent • Locations of Products & current authorities of the merging UCITS infrastructure; and and defined measures to ensure • Inward marketing & registration investor protection, each member costs. state must provide for domestic and cross border mergers under national Fund Mergers:-The Outcome law. • Fund Rationalisation & streamlining of Product Portfolio; Key criteria when considering • Amalgamation of smaller AUM cross border and domestic funds, increased economies of mergers:- scale & competitiveness with • Investor Implications: How is this international markets; likely to impact the tax position • Larger AUM funds with strong of current investors? Can the tax track records optimising market implications of the Rationalisation share; and be managed in an efficient way? • Potentially lower TER’s for • Product Portfolio:-Is there investors and opportunity for alignment of investment strategy reduced operating costs leading and a strategic fit of product to increased profit margins. between the proposed merging funds?
  3. 3. UCITS IV Fund Range Rationalisation Key challenges for Fund • The drawing up of common draft jurisdictions at national level, the Mergers terms of the potential merger and proposals under the UCITS IV create merger rationale to the investors further opportunities for greater While the introduction of cross of both the merging and receiving economies of scale and the potential border fund mergers is a welcome UCITS and impact assessment of reduction of TER’s through the development, certain factors have the proposed merger; facilitation of cross border Master been identified that may prove Feeder structures and enabling one • The valuation of assets and challenging during the merger or more feeder funds to pool their determination of the calculation process:- assets in a single master fund. method of the exchange ratio; and • Tax implications – evaluating the tax implications of fund mergers • Avoiding an excessive outflow of Key requirements for Master for the underlying investor and AUM for the merging fund at the Feeder Structures within the management company may point of merger. UCITS:- prove challenging while there • The Master and each of are different taxes regimes in the Master Feeder Structures:- the Feeders must each be respective countries of residence UCITS IV proposals also provide established as a UCITS fund; and until such time as the merging of UCITS is recognised for asset pooling measures through • Each Feeder Fund is required to as a tax neutral event; the facilitation of Master Feeder invest at least 85% of their assets structures. While Master Feeder into the Master Fund, with a structures already exist in some maximum of 15% of their assets
  4. 4. UCITS IV Fund Range Rationalisation held in ancillary liquid assets, • If the Master Fund and the Key Challenges for Master financial derivative instruments Feeder Fund are established in Feeder Structures or in the case of investment different; jurisdictions, the Master The key challenges to implementing companies, property essential for Fund must also demonstrate that Master Feeder Structures will the direct pursuit of business; it is a UCITS fund and that it is include:- not itself a Feeder Fund; • To avoid the creation of opaque structures, the Master Fund • The Master Fund and the Feeder • Drafting of legal documentation may not be itself a Feeder Fund Fund must enter into a legally and enforceable agreements nor may it invest in the units of binding agreement; which the Master and Feeder another Feeder Fund. The Master UCITS must enter into or the • The Feeder Fund and the internal conduct of business rules Fund must provide a declaration Master Fund may have different where both are managed by the to the effect that it does not hold custodians or auditors, however, same management company; any units of a feeder fund as part if this is the case, the parties of the approval process; • Effective monitoring and must enter into an information • The Master, or one or more sharing agreement; and information sharing of Master by Feeders may be located in the Feeder Funds; • The Feeder UCITS must act different Member States; • Market timing & impact of events in the best interest of its unit- • The Home State Regulator of the holders and in doing so shall of the Master Fund affecting the Feeder Fund must approve its monitor effectively the activity of Feeder Funds; investment policy; the Master UCITS. Example of Asset Pooling within Master Feeder Structure Master A Master XY Feeder funds Feeder Feeder Feeder Investors
  5. 5. UCITS IV Fund Range Rationalisation • Provision of investor information How we can help? Our Services comprise of the and information flows between PwC can provide a range of following:- custodian of Master and Feeder services to assist you in determining 1. Our tax services include: UCITS; your Fund Rationalisation / Re- • Analysis of tax implications pre & structuring Programme, whether • Fund redomiciliation and post restructuring; assisting with the initial feasibility migration services, including work and impact analysis and in Implementation of Master/Feeder • Avoidance of a taxable event for terms of identifying the potential structures; investors on restructure; cost savings to be gained from a rationalisation programme. We have • Global Fund Distribution • Maintaining investor tax a fully integrated Asset Management solutions; efficiencies of existing structures; and service offering for Asset Managers • Ongoing regulatory and tax operating and distributing UCITS reporting to ensure compliance • Minimising any additional costs funds. with cross border requirements in (e.g. transfer taxes) arising on relevant jurisdictions; restructuring. • Tax efficient investment strategies; • Product structuring of a cross border platform; and • VAT advice and structuring.
  6. 6. UCITS IV Fund Range Rationalisation We can help you to determine the • Assessment of the regulatory appropriate structure and framework environment; for your UCITS Product suite under • Consideration of the legal and the new UCITS IV regime. We have political principles; extensive experience in assessing taxation and regulatory implications • Fiscal & local taxation of Fund Rationalisation. PwC arrangements; operates a Global Fund Distribution • Government incentives & local service designed to provide Asset inducements; Managers with a series of solutions to ensure efficient and effective • Staffing & resource capabilities; cross border strategies. • Local compliance & corporate governance requirements; and 2. Assessment & feasibility study on rationalisation of EU domiciled • Marketability & passporting activities – arrangements. Focusing on the following:- 3. Business Rationalisation • Product Structure and Investment Services:- Strategy; • As part of the feasibility study, • Marketing & Distribution; and we will analyse the respective • Management Company & related qualities of domiciling each entity Administration activities. structure in a particular member state; As part of the feasibility study, we will analyse the respective qualities • We will assist with optimising the of domiciling each entity structure tax efficiency of the structuring in a particular Member State. Our through the management of review criteria will consist of the investors taxes, fund taxes and following:- portfolio taxes where possible; • This will include a review of the • Assessment of fiscal environment capital gain taxes, VAT and other to maximise investment tax transfer taxes applicable to the efficiencies; restructuring; • Consideration of impact of fund reorganisations for international investors;
  7. 7. UCITS IV Fund Range Rationalisation • We will assist with the transfer • In addition to our taxation – Global Human Resources of existing services to the core services and re-structuring Services business location of choice best analysis, we can also provide the – Operational Services suited to your corporate structure following services, our one stop and strategy; shop to Fund Rationalisation:- – Company Audit • Services will include corporate – Regulatory Advisory Services set ups, liquidation of existing – Legal Services structures, regulatory and advisory assistance; and – Company Secretarial Services
  8. 8. pwc.com/ie © 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. PricewaterhouseCoopers, One Spencer Dock, North Wall Quay, Dublin 1 is authorised by the Institute of Chartered Accountants in Ireland to carry on investment business. Designed by PwC Design Studio 02115.

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