Selectors' universe set to dramatically shrink fears Invesco's Aybran

Though the first MiIFID is only four years old, it looks like MiFID II may bring significant changes to the investment landscape in general and fund selectors in particular.

Obviously, the new fee regulation will be key for independent distributors and advisors, as many of them used to earn the bulk of their revenue in the form of rebates from asset managers.

But, as UK’s Retail Distribution Review (RDR) has shown, this can be managed by the industry and remains somewhat out of scope for most funds selectors.

The key change in our day to day life is likely to be found in redefined Ucits label, with several potential outcomes at this stage.

The mildest change could be the introduction of the 'complex Ucits' category for some funds; the harsher solution could be the sheer exclusion of some funds out of the Ucits universe, probably into the 'AIFMD' space.

As this text is being written, this debate is heating up, with ETFs at the forefront of it.

As opposed to the US, ETFs are widely used by professionals in Europe, and often by fund selectors, in order to perform shorter term moves, to manage cash or to build a position.

The bulk of European ETFs are synthetic. Were they to be taken out of the Ucits space, fund selectors would see their investible universe shrink dramatically.

But even in the 'mild' outcome where some funds (out of which ETFs) would be labelled 'complex' it would most probably limit their access for individuals, even within guided architecture and platforms’ buying lists.

Lastly, it is likely the so-called Newcits get pushed away some more from the Ucits space, thus leaving fund selectors with much more plain-vanilla vehicles.

To make a long story short, much is at stake in the current talks in Brussels. As of now, we don’t know exactly how we will be impacted, but we do know we probably will be in quite a meaningful way.

Bernard Aybran is the CIO and head of multimanagement at Invesco and is based in Paris.