Derivatives Houses Expect Go Ahead To Take On Fund Managers
The European fund management industry could be revolutionized if a change to fund regulation concerning derivatives that was proposed last week is approved by individual European regulators.
The European fund management industry could be revolutionized if a change to fund regulation concerning derivatives that was proposed last week is approved by individual European regulators. The European Commission proposed rule would allow investment banks to repackage derivatives as funds and sell them across Europe. "It's a really big deal," said Simon Gleeson, partner at Allen & Overy in London. "This clears the way for [Undertakings for the Collective Investment of Transferable Securities] as repackaging vehicles." Wrapping over-the-counter derivatives in different legal forms is a growing market for most investment banks. Tim Hailes, assistant general counsel at JPMorgan in London, said, "It opens up potentially new opportunities for offering derivatives products wrapped in funds form."
Alain Dubois, chairman of the managing board of Lyxor Asset Management, a wholly owned subsidiary of Société Générale with some EUR40 billion (USD48 billion) under management, said, "This is great news." Dubois believes the main benefit of the recommendation is it will clarify the situation because at the moment the regulations governing wrapping derivatives are interpreted differently by each national regulator across Europe.