Moody's: Asset managers' profits may be harmed by Ucits V
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Proposed amendments to Ucits rules threaten to place the profitability of asset managers under increased pressure, according to Moody’s Investors Service.
Last week, the European Commission suggested a number of changes to current regulations under the Ucits V proposals. These include harmonising the role and liability of Ucits depositories, regulating the remuneration of Ucits managers and introducing defined sanctions for non-compliance with the regulations.
Moody’s says the first proposal affects asset managers indirectly through increasing cost pressure on depositories, while the other two have direct cost consequences.
“We expect these changes to pressure the profitability of the European asset managers that sponsor Ucits funds, making the changes credit negative for the asset managers,” the ratings agency says.
“Fund managers Allianz Asset Management, BlackRock and Amundi Asset Management – as the largest Ucits providers – are likely to be most affected by this change.”
Moody’s also warns that the changes for Ucits depositories could ultimately reduce the choice offered to fund investors.
The suggested changes for depositories will increase depositories’ costs as they will assume greater potential liability for their own actions and those of their sub-custodians, the agency notes. They also have to change their due diligence processes and update their IT systems to meet the regulation’s new reporting and record-keeping standards.
Moody’s argues that these changes could make depositories less willing to offer their custody services to certain markets and to funds investing in complex assets.
“Eventually, if related costs increase to such an extent that investing in some emerging countries or in complex assets becomes unviable, asset managers may be forced to limit the available choices for the end investor,” it says.
The Ucits V proposals will be passed to the European Parliament and Council for negotiation and adoption.
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