The first deadline of this year’s sea of regulatory changes was yesterday (1 July) when groups became required to roll out the new Key Investor Information Documents (Kiids).
A mandatory part of the EU’s Ucits IV directive, Kiids must be produced for each fund and all of its relevant share classes. Although expectations are most companies have transitioned by the deadline, it has not been without cost and pressure on company resources.
And going live was just the first stage, with maintenance of each document requiring ongoing work exceeding that which would have gone into its predecessor, the simplified prospectus.
One of the implications for fund houses is that while there is no explicit penalty for a fund or group that is not Kiid-compliant on time many expect advisers will avoid buying such funds.
On top of all this Kiids stuff there are added resource and cost pressures from around a dozen regulations, legislation, directions or guidance in the pipeline, coming from the UK, Europe and the US and all of which will impact investment houses and wealth managers.
Some groups – Legal & General being one of them – are spending at least half of their entire corporate project spend on just dealing with these new regulations.
Product ranges will change and as a result fund charges are likely to rise raising uncomfortable questions for small and large houses alike:
- Will there be greater price differentials between funds offered by large and small groups?
- What is the opportunity cost of not being able to dedicate time and resource to other improvements?
- Will we see greater fund rationalisation with more funds being seen as uneconomical to run?
- Post-RDR, how will discretionary managers who are also fund manufacturers cope as they are squeezed as an advisory business, as a company facilitating advisers and as a provider?
Greater consolidation among asset managers is already being seen – with others looking to at least rationalise their product range – though the ultimate fallout for discretionary clients is still difficult to predict. What is slightly easier to see is a lot of running around and scenario planning to cope with AIFMD, the European Transaction Tax, the FATCA and Volker rules, the protected cell regime…let alone, RDR, Mifid II and Ucits IV, V etc etc…
