Top funds body says EU asset management plans could backfire

Top funds body says EU asset management plans could backfire

Ralph Orlowski

LONDON (Reuters) - Europe's leading asset management body has told the European Union that its plans for centralizing industry supervision could undermine the global appeal of EU-listed funds.

EFAMA is the latest to raise concerns that tinkering with the globally accepted regulatory practice of allowing asset managers in one country to run funds in another, known as delegation, could backfire on the bloc.

Major funds listing centers like Luxembourg have already raised concerns that the European Commission's proposals for centralizing supervision will damage delegation of asset management.

The Commission proposed in September giving new supervisory powers to the bloc's European Securities and Markets Authority or ESMA to ensure coordinated supervisory action in delegation, which is currently overseen by national watchdogs.

"It should however, be acknowledged, that delegation is already a reliable, well-functioning and tested model, central to ensuring investor choice with the ability of EU investors to access world leading investment expertise and the associated improved investor outcomes," EFAMA said in a statement.

ESMA issued guidance in May on delegation for asset managers in London who want to continue running EU-listed funds after Britain leaves the EU in 2019.

The European Funds and Asset Management Association (EFAMA) said there were already safeguards to stop "empty shells" being created.

"Ultimately, from an EFAMA point of view, nurturing UCITS' global appeal, is of paramount importance."

UCITS, or the EU's set of rules governing mutual funds, is globally recognized, drawing investors from over 70 countries across the world.

ALFI, the funds body for Luxembourg, a major listing center for UCITS, said this month the proposals would "undoubtedly have a negative effect on the competitiveness of EU funds" and offer "no added value".

Funds industry officials say Paris wants to attract UCITS listings and is pushing for stricter controls over delegation, and the proposals have raised concerns beyond Europe.

ICI, a global funds body based in Washington, said last month that the proposals risk closing off Europe to outside fund managers and could prompt retaliatory measures by other regions.

ESMA Chair Steven Maijoor said this week that conditions for delegation were not onerous.

A European regulatory official said the proposals do, however, appear to give some leeway for bilateral agreements on delegation after Brexit.

(Additional reporting by Maya Nikolaeva in Paris, editing by Adrian Croft)