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How to navigate the fund reporting regimes of Europe and the UK

26 September 2023

Knowing how to navigate different reporting regimes, especially from a tax perspective, is crucial for successful cross-border distribution

Successful execution of a cross-border fund distribution strategy requires a lot of work and planning, but increasingly also a deep understanding of various fund reporting regimes. This is largely because of the greater cost pressure asset managers are having to cope with. New product launches must reach a critical mass more quickly, which means distribution teams are increasingly eager to access different investor markets throughout Europe. Highlighting a strategy’s potentially beneficial tax treatment for the end investor can be a great way of cutting through the noise and getting a new fund to the forefront of investors’ minds. 

Making cross-border distribution work

The focus on tax reporting requirements has become a crucial factor in cross-border distribution strategies. Knowing how to navigate different jurisdictions, and how investors’ tax affairs are treated in each location, is now a must-have for any distribution team with aspirations across Europe. A key driver behind this trend is that there is increasing competition between different jurisdictions for asset managers considering cross-border bases.

Brexit arguably started this trend, as historically there was a lot of focus on UK tax reporting and for a long time many fund distribution relationships were built around its arrangements. The UK’s formal exit from the EU at the start of 2020 changed this and was a key development in increasing competition in this part of the market. In recent years, jurisdictions including Austria, Germany, Switzerland and the UK have either introduced new tax reporting regimes or modified existing ones. This means cities such as London, Dublin, Luxembourg, Frankfurt and others are all competing to become the location of choice for asset managers.

However, this divergence creates complexity. Authorities in both Germany and the UK, for example, require advance information from firms with additional ongoing daily, monthly or annual reporting compliance obligations. There can also be significant variations between locations in tax deadlines, as well as how taxable gains and income are calculated.

In some ways, though, this is a fortuitous time to be an asset manager. In such a competitive market, this divergence means there are more options for cross-border distribution strategies that benefit both the investment manager and, ultimately, the end investor. Conversely, it also brings greater complexity and raises the bar on how much technical knowledge is required. If structured incorrectly, inefficient tax treatment for an end investor could severely erode any returns they gain from their fund. The burden is then placed upon asset managers and fund administrators to expertly navigate what is a complex and fast-evolving landscape for the benefit of investors.

The importance of informed decision-making

At Apex, inquiries in this area have spiked over the past 18 to 24 months. Clients are increasingly turning to Apex, which benefits from being a large, full-service fund group, to ask about how these different reporting regimes can best be navigated as part of a cross-border distribution strategy. A broader range of questions are being asked by asset managers, raising more options than firms traditionally had to choose from.

Getting the right answers can help charter effective distribution routes throughout these jurisdictions. To understand how firms can align distribution strategies with the right tax treatment for individual investors, Apex is part of several tax groups across Europe. These include the AIMA Tax Committee, a leading group for the alternative investment management industry. Gaining insights, and being party to such discussions, can help clients stay alert to any potential changes that may impact their distribution strategies.

To find out more, please contact the team.



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