However, before entering the market, fund providers need to understand the complexity of European fund distribution in practice, as well as the diverse market requirements and legal frameworks. This article is intended to give an initial overview for international asset managers looking to enter the European market.
UCITS, AIFMD and other Regulatory Framework in European Fund Distribution
Two key regulations standardise fund distribution in Europe and make cross-border distribution easier: the UCITS Directive (Undertakings for Collective Investment in Transferable Securities) and the AIFMD Directive (Alternative Investment Fund Managers Directive). Understanding these directives is crucial. To put it in simple terms, the UCITS Directive can be seen as a ‘European passport’, enabling fund providers to distribute their funds across EU member states without additional approvals. The AIFMD, on the other hand, targets alternative investment funds (AIFs) intended for institutional and professional investors, requiring strict risk management and transparency standards.
MiFID II: Relevance and Impact on European Fund Distribution
One of the most extensive financial rules in the EU is the Markets in Financial Instruments Directive II (MiFID II), which regulates consumer communications, investment advice, and the distribution of financial instruments. For fund distribution in the EU, compliance with MiFID II is not just a requirement but a commitment to ensuring strict transparency, fee structure, and product information standards.
MiFID II also mandates that each product’s distribution strategy is documented and that all measures are in place to avoid conflicts of interest. A compliance strategy that meets MiFID II requirements is essential for asset managers who distribute their products directly or through third parties.
To sum it all up
European fund distribution presents significant opportunities for foreign asset managers but requires a deep understanding of regulatory frameworks and market structures. Numerous aspects must be considered when entering the market, from choosing the right licensing structure (own license or ManCo) to complying with MiFID II and partnering with local distributors. Asset managers who can meet these requirements and develop a flexible, market-specific distribution strategy are well-positioned to succeed in Europe.
FundFinity supports international asset managers every step of the way, offering tailored solutions for European fund distribution to enable sustainable growth in this promising market. Contact us today to learn more. We look forward to discussing your growth objectives!
For more info: https://fundfinity.net/blog/european-fund-distribution-key-insights-for-international-asset-managers/
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