The New York-based mutual fund research house said the decision by the Comisión Clasi?cadora de Ries (CCR) “threatens both the cross-border opportunity for fund managers as well as the global mutual fund Ucits brand.”
The CCR took the decision to “disapprove” Dublin-based Ucits funds because of concerns around the country’s sovereign debt and, while the Dublin fund industry is clearly insulated from those issues, there remains a perceived weakness.
Daniel Enskat, head of global consulting for Strategic Insight said: “Dublin as a fund domicile is not related to sovereign debt concerns, but the subjective and public concerns around the European debt crisis by institutions in Latin America or Asia have a concrete and severe impact with Chile disapproving 155 Dublin-based funds.
“Multi-billion dollars in assets are now considered restricted investments, with some of them exceeding allowable investment limits and thus at risk of immediate redemptions.”
Chilean pension funds are allowed to invest up to 80% of their assets in offshore funds; this means that there is currently $155bn in assets under management in cross-border products. According to Strategic Insight, this reverse home bias has significantly benefited a number of international fund managers and their flagship Ucits products, with firms such as Fidelity, Blackrock and Franklin Templeton managing Chilean pension assets of between $6bn and $9bn each.
Pyrrhic victory
However Enskat added that, while Luxembourg and other hubs may benefit from what is clearly a huge PR blow for Ireland, it may turn out to be a “pyrrhic victory” and could damage the industry as a whole.
“A key concern for the industry is to maintain the strong reputation of Ucits as the global mutual fund brand of the industry, and the recent talks about an Asia passport, alternative Ucits in Europe, and the institutional investor reactions in Chile necessitate an immediate and forceful response by executives and thought leaders to safeguard the industry brand in this time of global uncertainty,” he said.
