Global fund firms fret over new UAE fee structure

Reuters

* SCA passed new fund fee structure late in June

* Details yet to be confirmed in Official Gazette

* Fund managers worry structure will hurt business

* Decision may boost local fund firms

By Dinesh Nair and Stanley Carvalho

DUBAI, Oct 3 (Reuters) - International funds sellinginvestments in the UAE plan to lobby financial regulators toease new product registration fees which they complain are muchhigher than the charges on local operators and could run intotens of thousands of dollars.

"You do not create an efficient and competitive landscape bycharging different amounts for local and international firms,"said one Dubai-based head of a global asset management firm whoasked not to be identified.

"That too, at such huge disparities.

"The SCA has listened to us in the past and we hope they listen this time too. It's in everybody's interest," he said.

The region is a major revenue driver for asset managementfirms such as BlackRock Inc, Fidelity Investments,Barings Plc and T Rowe Price which sell their productsvia banks and insurance firms to wealthy Gulf investors,institutions such as sovereign wealth funds and family firms.

By contrast, local asset management firms, which focus oninvesting within the Gulf, have struggled to attract investorinterest and stay afloat since the 2008 financial crisis.

The UAE's Securities and Commodities Authority is proposingto charge international companies 30,000 UAE dirhams ($8,200) toapprove funds being promoted to the public along with a 5,000dirham fee for examining the application.

Funds being sold to private investors cost 15,000 dirhams toregister.

The new scale of charges was issued in June but has yet tobe confirmed by being published in the Official Gazette.

Asset managers have complained that costs will soar ifproducts are sold through multiple distributors.

If an international fund sells three products through threedistributors, registration fees could total 270,000 UAE dirhams($73,500).

By comparison, Singapore charges an initial fee of S$1,200per fund and an annual fee of S$1,200 ($960), according to anexecutive at an international fund firm said.

Rates in Luxembourg are fixed at 5,000 euros ($6,800) forthe range of funds which the asset managers intend to sell, hesaid.

The UAE SCA said local fund firms are required to pay 10,000dirhams ($2,700) as licence fees and 5,000 dirhams fee for anapplication to sell their products in the country.

Peter Duke, sales director for Fidelity Investments inDubai, said the impact of the new charges would not fall onasset management firms but on those promoting the funds, likebanks.

"But the reality is that the fund promoter will pass thecosts to the fund provider or customers,"

"The fee structure doesn't work in the best interests ofcustomers. Some international firms could decide to reduce theirpresence because it would be difficult to justify the charges orcosts."

In response to questions from Reuters, the SCA said in astatement that its registration fees for funds were among thebest in the world and were designed to encourage fund providersto offer only high-quality products.

"Investment funds' registration fees could help curb thesupply of large numbers of foreign funds at the expense of athorough due diligence processes by the promoters, and to thebenefit of high quality foreign investment funds," the SCA said.

It added that the fees appeared high because the SCA haddecided to introduce one-off, non-recurring charges.

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