French funds look to boost appeal as Brexit looms

French funds look to boost appeal as Brexit looms

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The French fund industry is looking to boost its appeal as the UK leaves the European Union by making enhancements to attract foreign investors.

A new report, put together by Euroclear and consultancy Ailancy in cooperation with roughly two dozen market participants including Carmignac and Caceis, sets out 16 recommendations to make the French market more attractive in a post-Brexit landscape.

The suggestions include the adoption of new technologies such as blockchain to inject transparency into the distribution chain, the creation of know-your-customer (KYC) infrastructure, and the use of funds for collateral management.

Both the use of technology to help buy-side firms know their investors and the development of cost-pooling KYC capabilities are among the more urgent changes proposed in the report.

“This report is the first step of a process that will allow to further increase attractiveness of the French fund distribution model to meet the evolving needs of both issuers and investors,” Brigitte Daurelle, chief executive of Euroclear Belgium, Euroclear France and Euroclear Nederland markets, said in a statement.

The study follows up on the French Routes and Opportunities Garden (FROG) project launched by the national regulator and the French Asset Management Association (AFG) in 2016.

The FROG report highlighted that the UK’s exit was an excellent opportunity for Paris to establish its position as a financial hub.

“Given the result of the British referendum on the European Union, certain players across the Channel could consider the total or partial relocation of their activities to continental Europe. This one-off context places the Paris financial centre in a new position,” the report read.

“The attractiveness, excellent amenities and conditions afforded by the French asset management ecosystem… will allow players to continue to benefit from marketing and cross-border management mechanisms provided for in the texts of the European Union (passport).”

At the end of 2017, the French fund industry managed €4 trillion (£3.5 trillion) worth of assets, nearly half of which representing domestic funds, according to AFG data.

Euroclear disclosed in March it was switching its legal structure from the UK to Belgium because of Brexit.

Paris and Frankfurt urged European regulators in 2017 to clarify their stand on the location of euro clearing businesses, which are currently concentrated in London.

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