Distribution of funds

Distribution of Luxembourg UCITS funds in other jurisdictions

Luxembourg UCITS funds have, for many years, been the leading product for cross-border and global fund distribution. More than 40 of the top 50 leading cross-border fund management groups use Luxembourgbased UCITS platforms for their global distribution strategies. As such, outside the EU, there is a strong brand recognition and acceptance by host country supervisory authorities of Luxembourg UCITS for public distribution.

Within the EU, Luxembourg-based UCITS funds benefit from the passporting arrangements available under the UCITS Directives and are thus able to be freely publicly marketed within all Member States, subject to the "notification" process in each State.

The notification procedures to follow in each Member State have been determined by the UCITS Directive. However, there are generally differences from one country to the other, which often relate to the specific details of local marketing arrangements (which are not harmonised by the UCITS Directive); the need, in some Member States to appoint a tax representative or a formal representative towards the local supervisory authority; and the translation requirements of fund documentation. The Luxembourg UCITS funds will often be required to appoint a financial institution to act as a local paying and information agent towards local investors.

Moreover, in addition to the reporting obligations contained in the UCITS Directive, Luxembourg UCITS funds will often be required to satisfy the local regulations governing marketing and advertising in each country of distribution.

Outside the EU, Luxembourg UCITS funds must satisfy the regulatory framework governing public distribution of foreign funds in each intended jurisdiction. This will of course vary from country to country. However, the Luxembourg UCITS brand is well recognised and accepted as having high levels of consumer protection, risk diversification and management and overall governance. In many jurisdictions this acceptance is formally incorporated into local regulations meaning that UCITS funds have a “lighter” authorisation process than is the case for non-UCITS equivalent investment funds.

The UCITS brand has grown to be associated with excellent investment products benefitting from a strong and effective supervision. Traditionally sold only into European markets, Luxembourg-based UCITS funds have initially entered certain Latin-American territories, such as Peru and Chile, where they were sold to pension funds. Subsequently to this, Asian markets have become key distribution territories for UCITS; for the years 2007 and 2008, more than 50% of the sales of UCITS were originated outside Europe with the majority coming from Asia. The charts below show the “hot spots” for distribution, with the total number of registrations at the end of 2008.