Analysis: Asset management: Towards a single EU market

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Deutsche Bank Research authors argue on possible ways to foster a truly pan-European investment market.

Raimar Dieckmann, Nikolaus Neundoerfer and Immo Westphal from Deutsche Bank Research say much remains to be done to create a single market for the investment fund industry.

In their opinion, this industry “plays a vital macroeconomic role as it contributes to the efficient allocation of capital” and “an efficient investment fund industry is crucial to enhance the financial independence of EU citizens.”

Despite its importance “national borders and deficiencies in the regulatory framework continue to restrict the full evolvement of a single European market in asset management,” according to the authors. To make real change, they advocate “a fundamental revision of the UCITS Directive in (the Commission’s) White Paper” due at the end of 2006. They support their arguments through the following points:

  • “The cross-border distribution of investment funds is still on a small scale due to tax constraints, diverging notification procedures and barriers to cross-border fund mergers.”
  • Due to cross-border barriers, the market is “highly fragmented” resulting in investment funds of “suboptimal size.”

To remedy the current situation, they highlight a few “high priority issues”:

  • Deficiencies in notification process, which could be solved through “basing cross-border distribution on mutual recognition.”
  • “The inclusion of a cross-border merger regime in the UCITS framework.”
  • Updating the risk categorisation system
  • The application of the Lamfalussy framework to UCITS

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