The European Commission has launched a public consultation to gather input from the public – including fund managers, investors and consumer representatives – on how the cross-border distribution of funds could be improved. Overcoming barriers to cross-border investment funds will help increase the choice of better-value savings products for investors and so play an important role in achieving the EU's aim of building a Capital Markets Union. The public consultation opened on 2 June and will run until 2 October 2016.

Why the consultation?

The recent status report of the Capital Markets Union, which summed up the progress made so far, revealed a considerable number of concerns from stakeholders about regulatory and administrative barriers to the cross-border distribution of investment funds.

The EU has a pretty successful track record of promoting the cross-border distribution of funds. Since the UCITS (Undertakings for Collective Investment in Transferable Securities) directive introduced the first marketing passport for funds in 1985, the UCITS market has grown to € 8 trillion of assets under management (2015 figures). And 80% of UCITS funds are marketed across borders. Furthermore, the Alternative Investment Fund Managers Directive (AIFMD), which was agreed in 2013, introduced a passport for non-UCITS funds. There are currently about € 4 trillion of assets under management in AIFs, with 40% of funds marketed across borders.

However, despite this one third of UCITS that are marketed across borders are only sold in one other Member State in addition to their home country. Another third is not sold in more than four other Member States. Furthermore, there are more than 30,000 UCITS funds available for sale in Europe, compared with 7,000 mutual funds in the United States. Consequently, while the average European mutual fund is valued at approximately € 200 million, its counterparts in the US are almost seven times as large.

Regulatory barriers

There are a number of reasons for the limited cross-border distribution of funds, which include for example a cultural preference for funds managed in investors' home country, or a lack of incentives for managers to compete cross-border.

However, one obstacle in particular that was identified in recent consultations was regulatory barriers to distribution. These include onerous registration procedures, costly and diverse marketing requirements, inconsistent administrative arrangements and tax obstacles. The current consultation aims to dig deeper, gathering further details and evidence about these specific issues.  

The Commission is particularly interested in getting input from fund managers, distributors, investors and consumer representatives in order to draw a more complete picture of the barriers to distribution. It is hoping to receive tangible examples and, wherever possible, quantitative and financial evidence of the financial impact that barriers are having.

The information received from the consultation will feed into the Commission's assessment of what steps should be taken to address the barriers to the cross-border distribution of funds.

Read more on investment funds or respond to the consultation