Jury still out on post-crisis regulation

Jury still out on post-crisis regulation

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Less than a fifth of asset managers polled by J.P. Morgan Investor Services agree that market regulation introduced in the wake of financial crisis has improved investor confidence.

Out of 80 fund managers quizzed in a webinar hosted by the investment bank's investor services business, only 18.6% said regulatory initiatives around the globe had bolstered buy-side confidence.

Meanwhile nearly half, 46.5%, said new policies and procedures have led to no improvement in confidence whatsoever.

The online seminar, in partnership with Dechert and FUSE Research Network, also found disagreement on whether new regulations are helping to facilitate access to offshore funds in local markets.

Less than half, 44%, said they are helping, while 56% reckon they are posing additional hurdles.

“The jury is still out on the final impact of some of the regulations,” J.P Morgan's summary of the web discussion.

“It is not just all of the new regulations, but the sheer volume of additional rules likely still to come that have many managers overwhelmed by the potential costs and compliance requirements of the post-crisis environment."

Compounding the difficulties is the "mosaic effect" that has resulted from different jurisdictions coming at the reforms from different perspectives and timelines.

For example, it has become more difficult to create one-size-fits-all distribution platforms when managers have to comply with MiFID in Europe, RDR in the UK, excessive fee lawsuits in the US and the Securities and Exchange Commission’s increased scrutiny of the use of derivatives by liquid alternatives and other types of mutual funds.

"Firms with the scale and flexibility to develop local product and service operations and strategically work with local distribution partners increasingly have the edge," J.P Morgan added. 

Chris Christian, partner at Dechert, said many of his clients are concerned that certain aspects of MiFID could threaten their ability to run a “soft dollar” program globally.

“The proposed rules on the use of dealing commissions could force the managers to unbundle their programs and either charge European clients for research or internalize the costs and pass them on to all their clients (which might not sit so well with the US-based ones).

“US-based managers also worry about the impact the remuneration rules in UCITS V could have on their retail mutual fund business," he adds.

On that front at least, Christian himself is more sanguine, believing the UCITS V regulations will ultimately be interpreted and enacted in a way US managers can live with.

 

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