The Sicav will win in the end

When Swip announced the closure of its Sicav last week, the group's European MD Christian Elsmark said the range was not serving investors well and they prefer to use the firm's Oeic.

That may well be true, but the real reasons for this decision were pragmatic. Swip has immense distribution power in the UK, so it sells its funds successfully. To get onto recommendation lists in mainland Europe, a provider needs a unique selling point - which for the big European investors means talented fund managers in key asset classes.

Once the emerging markets team left for Martin Currie, Swip just didn't have enough firepower to make a name for itself outside its home market. So does this mean other UK groups could follow suit and scrap Sicav ranges?

The plain truth is that British firms which succeed in their home market because they have distribution but have no USP to take abroad will not flourish internationally. 

The same is true in any country - look at the example of Spain's domestic asset managers. The Spanish press regularly reports rumours and speculation about the future of the big bank-owned fund houses, but these institutions can't find buyers even if they want to because without the captive bank distribution they just aren't attractive enough.

But there's another angle to this story. Those who remember the birth of Oeics may recall that a key aim was to create a new fund structure to take on the Luxembourg and Dublin funds. But messy compromises diluted its effectiveness. In the UK, investors still talk about unit trusts. And with a few exceptions, Oeics have not conquered continental European markets.

Ucits IV will bring us fund mergers and master feeder structures. There are now senior people at UK-based fund groups who are talking about a single fund range but see Sicavs, not Oeics, as their future.

The UK industry fights its corner vigorously whenever measures are proposed that would give any other European fund centre a competitive edge. But a very large number of Luxembourg funds are run by UK-based managers. In the long term, would it really be so bad if Luxembourg became the fund domicile of choice?

True, London would lose some admin jobs, but the portfolio managers wouldn't move to Luxembourg. With so many of the leading fund managers sitting in the UK its position as a centre of investment excellence would be safe.

I think Swip, and other UK players whose strength is domestic distribution, are going against the stronger long-term trend by abandoning its Sicav.