The pioneers of the Luxembourg fund industry had dreams of creating a fund industry for consumption by investors in Europe, but they could not have foreseen the true extent to which the Luxembourg domiciled Ucits has travelled. Over the course of the last decade, it has found itself taken to virtually all corners of the world as it has evolved from a largely European product to one that has become successful in Asia, South America and the Middle East. 

In contrast to Phileas Fogg’s lone voyage of yesteryear, the journey today is being taken by increasing numbers of voyagers who have recognized the benefits of a global “flagship” fund range based on Ucits. Ten years ago, just 38 asset managers set forth as intrepid explorers compared to over 142 today. This number is expected to increase as more asset managers continue to benefit from the trail set by the earliest of these pioneering fund promoters.

Rewards for undertaking this journey have been highlighted in an Efama paper where a group of leading fund promoters confirmed that 90% of sales were flowing from South America and Asia and that the rate of growth was faster than that experienced in more traditional markets. That effect continued in 2009. The Luxembourg-domiciled Ucits has increasingly been used as the vehicle of choice for this journey accounting for over 75% of total cross-border fund registrations (PwC Global Distribution Survey 2009) on behalf of over 7,300 funds, almost doubling the number from 2002. Undoubtedly this journey will continue as the emerging markets in Asia and Latin America, and to a lesser extent Central and Eastern Europe, continue to mature, combining newfound wealth and favorable demographics. We expect the number of asset managers utilising Ucits to increase further over the next five years. 

The importance of travelling companions

However it is by no means plain sailing. We are starting to see obstacles appearing to hamper this growth and potentially derail progress. In the future, fund domiciles such as Australia or a new Asian domiciled product could compete with the Luxembourg Ucits; however, today, the competition is coming from domestic Asian fund industries which are continuing to mature.Where Phileas Fogg trod, his faithful manservant, Passepartout, followed. The Ucits fund has its own trusted companion too, the transfer agent, who has had to keep up with the pace set by the Ucits fund. This function is critical to delivering global “best-in-class” investor experience.The transfer agent used to be seen as a necessary evil by most fund promoters, required to process deals and maintain the shareholder records, with much delivered in the least mature of processing environments.  The transfer agents have had to invest heavily in their capabilities, infrastructure and people. A single model of client service centre will no longer suffice in supporting fund promoters and their investors alike, who demand support in their own timezone, language and, of course, demand immediate access to information.In doing so the transfer agent has proven its value, having navigated the challenges of providing “global working week coverage”, encompassing systems and operational design, while interfacing with global banking and clearing systems.  “Following the sun … around the world in 24 hours”, a phrase used for global servicing coverage in effect 24 hours a day, is a must to meet investor expectations. Product structure is also critical; for example, designing and supporting funds with a late European or US valuation point which allow the issuance of trade confirms at the beginning of the following day in Asia is key.Just as Passepartout was an invaluable aid for Phileas Fogg, never before has it been so important for a transfer agent to be the global Ucits fund’s partner. As with Fogg’s journey, the road ahead will be challenging.

There will be mountains to climb – most notably with regulatory change (Ucits IV, AIFMD, AML, etc.), continuing product development and competition from local products. However, unlike for Phileas Fogg, where his journey ended at the London Reform Club 80 days after it began, to collect his wager of £20,000, for the fund industry both the duration of this adventure and the possible benefits for both investors and promoters should be many times greater. The future, both for the industry and more importantly, for the investor, should be bright.