The European regulatory initiative known as ‘UCITS’ has evolved into a “global passport” opportunity for Canadian fund managers to achieve rapid, worldwide growth in a cost-effective manner, according to a report released by RBC Dexia.

The report shows that fund managers in the United States and Europe who have taken advantage of UCITS have benefited from rapid product development, larger client bases and operating leverage.

The survey of 110 fund companies from 23 countries (representing $2.3 trillion in assets), was conducted by London-based CREATE-Research and sponsored by RBC Dexia Investor Services.

Fund managers can expect continued growth, the report found. Asset-weighted growth of UCITS registered funds is expected to increase at a compound annual rate of 20% in Europe, 25% in Asia and Latin America, and 12% in Africa.

“UCITS promoters have moved beyond their original goal of distributing and selling robust, well-regulated investment funds to retail investors across the European Union and are now widely distributed in regions such as Asia, Latin America and Africa,” says José Placido, CEO, RBC Dexia. “Our research also indicates they hold broad and growing appeal to institutional investors.”

“The UCITS framework presents a substantial global growth opportunity for Canadian fund managers with a solid product offering and a track record of performance,” says Tony Johnson, global head of sales and relationship management at RBC Dexia. “To date, too few home-grown funds have reached investors beyond Canada’s borders. This global passport gives them the ability to scale up, create strategic alliances and build their businesses globally at low cost.”

UCITS is a series of European Union financial regulatory initiatives dating to the mid-1980s, created to allow fund managers to operate across borders within the European Union under the same set of rules and regulations.

According to the survey, the innovation and product development enabled through UCITS registration has helped fund managers attract, retain, motivate and deploy talent. Most of the innovation has been targeted at customising existing products. 82% of fund managers name ‘rapid product development’ as a key advantage to UCITS registration. As a result, retail investors in Europe have almost four times as much choice of funds as those in the United States.

The report also pointed to the emergence of third-party administrators as helping to enable Canadian fund managers to compete effectively with the larger players for the global investment dollar.

“The report highlights the need for fund managers to focus on their core competencies in manufacturing, while outsourcing non-core activities to third-party administrators and distributors, enabling the growth of the business and client service, while removing systemic inefficiencies in the industry,” says Amin Rajan, CEO of CREATE-Research and author of the report.