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Friday, June 02, 2006

Are Funds More Fearless in Europe?

Reported by Marie Glancy

With the U.S. Fund industry chastened by regulatory activity and the European Commission promising to smooth cross-border hassles, EU players might be more full of free market joys these days. Certainly, to observe the NICSA and Dublin Funds Industry Association's annual joint conference in Ireland, which wrapped up Wednesday, was to get a sense of a very different regulatory environment than exists in the U.S.

On the whole, it seems the regulatory scourges that have troubled so many companies stateside in recent years have made relatively little impression on the prevailing mood of growth-fueled optimism in Europe. More than one American delegate agreed that their Irish, British and continental counterparts feel the Atlantic is a kind of buffer in this regard, despite the profound interconnection of the two continents' fund businesses.

Still, if cold dread is missing, that's not to say regulatory issues are not a preoccupation in the EU, where coordinating lawmaking for twenty-five nations has become a never-ending bureaucratic bad trip. As firms struggle to meet the stipulations of both individual member-states and the European Commission, demand for technology to help with compliance and information management has surged.

The headaches may soon lift. “Finally, the EC is beginning to listen to what we have to say,” said Mark Tennant, senior advisor at JP Morgan Securities and a member of T. Rowe Price's international advisory board, as he introduced the conference's EC keynote speaker, Niall Bohan.

Head of the asset management unit for the DG internal market at the Commission, Bohan said his office is coping with rapid change as European investors grow ever less willing to lock up their savings in low-return products. Fund companies are looking to do more cross-border merging, to open up their distribution channels, and to roll out new products, he said.

To keep pace, the EC will work on minimizing delays associated with “product passports” that allow funds to be sold across borders, as well as on resolving tax conflicts and clarifying what portfolios can include.

“Hedge fund investing for the retail investor is no longer a taboo subject – the debate is over the circumstances in which it can take place,” he said.

Indeed, depending somewhat on which authorities you look to, money managers in Europe appear to be getting the thumbs up to ply their trade with a measure of creativity and flair.

Michael McDowell, Ireland's justice minister, illustrated this in his remarks at the opening dinner of the conference. Stressing that the country's economic success was made possible by a “social consensus” that refuses to “begrudge” the achievements of the financial services sector, McDowell warned against letting the “dead hand” of state control weaken innovation.

“Ireland welcomes you, Ireland thinks positively of you, and Ireland wants you to do business in Ireland,” he told the assembly.

(As a side note, McDowell's warrant to make statements on behalf of the government may not last: after the speech he hastened out the door and into a firestorm over a legal loophole that's led to calls for his resignation.)  

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