The European funds market is about half the size of its US equivalent, yet it has three times the number of funds thanks to the existence of multiple platforms and duplicated ranges across territories within the EU. Aside from being administratively burdensome for companies this is also unnecessarily costly and inefficient.
It is estimated that the pooling of fund assets could deliver the economies of scale present in the US and yield savings of as much as €5 billion per annum, as well as resulting in significant tax and VAT savings both for investors and fund managers.
In July 2008 the European Commission acted to facilitate the implementation of pooled fund structures by creating a framework for facilitating cross-border fund mergers and allowing fund assets to be pooled cross-border. This will enable the use of master/feeder arrangements, and mean that both retail and institutional investors can access the same tax efficient platforms, generating further economies of scale.
With the deepening trend towards aligning the tax treatment of overseas funds with those domiciled in the UK, one of the main reasons for maintaining separate UK platforms alongside overseas structures is set to be removed. Although, there continue to be administrative and distribution advantages (such as investor and intermediary recognition) which make domestic structures attractive as feeder vehicles for an offshore master fund.
There is a growing awareness of the savings, and the competitive advantage, to be achieved through the adoption of asset pooling techniques.
Whilst the potential benefits of Asset Pooling are attractive, it is necessary to ensure that the investment process is not unduly hampered and the intended tax benefit secured. We are the foremost professional services firm for Asset Pooling and our experience includes: