Regulatory Challenges for the EU Asset Management Industry

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The European asset management industry is feeling squeezed from all sides, as a result of growing prudential, product and conduct regulation. A new Directive, UCITS IV, has only just been enacted, and already new challenges are emerging in the regulation of hedge and venture capital funds, the review of the regulatory regime for depositaries (or financial custodians) and amendments to the MiFID Directive. In addition, a new European supervisory framework is in the making, which implies much stricter controls on enforcement. These changes are taking place in the context of one of the largest declines suffered by the industry in the last two decades, from which many fund managers have not yet recovered. This paper first briefly reviews recent developments in the EU asset management industry, followed by a discussion of the regulatory framework for asset management and the challenges ahead. Its focuses primarily on the UCITS and emerging non-UCITS investment fund regime, and its interaction with the MiFID regime covering investment services.