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Globally Active Funds Get Voice at ICI: Q&A With Dan Waters

At the start of October, the Investment Company Institute announced it was going global.

Or, rather, it announced the creation of ICI Global, a new arm that would as a trade association for global investment funds, their managers and investors.

ICI Global members will include regulated U.S. funds and non-U.S.-based funds that are marketed to investors around the world.

Named to head the group that will take on regulatory, marketing and other issues for globally active funds is Dan Waters, a longtime regulator in the United Kingdom.

Waters, who will be managing director of ICI Global, oversaw asset management policy at the Financial Services Authority, which was disbanded in the wake of the 2008 financial crisis. Waters also represented the United Kingdom on the International Organization of Securities Commission (IOSCO) Standing Committee on Investment Management.

Waters will lead ICI Global's international funds work from its London office. Here is his take on where ICI Global is headed.

MME: What do you see role of ICI Global being, long-term, for the funds industry worldwide?

Waters: Global fund managers are now responding to issues that aren't discrete from one jurisdiction to the next but are transnational and even global. And they thought it imperative that some organization come to the fore to begin on behalf of global funds to address those issues.

ICI Global recognizes the fact that fund activities, business strategies, and regulatory concerns certainly all have become global, and that's a trend that has certainly accelerated following the financial crisis, and the ongoing financial difficulties we face.

The ICI Board of Governors approved the launch of ICI Global as an arm of the ICI, with its members drawn from the global funds industry.

MME: What impact do you think it can have?

Waters: The reality today is that regulations anywhere can impose new costs and new operations demands everywhere. We will be a voice of the global fund industry in the ongoing global dialogue about fund regulation and we will be a new resource for global fund managers worldwide.

We have organized our efforts into four focal areas.

First is the role of funds and fund managers in financial stability, in which we will promote the unique role that asset managers play in the global financial system. This will touch on issues including non-bank financial intermediation, systemically important financial institutions, money market funds, securities lending and repos, and exchange-traded funds.

The second focal area is key regulatory developments for funds. Here, we will encourage harmonized standards, where appropriate. Issues we're looking at include tax and accounting changes, such as the Foreign Account Tax Compliance Act, for example, global trends in fund distribution, global fund disclosure standards, use of derivatives by funds, regulation of remuneration/compensation and global custody.

The third issue on our agenda is trading and market structure. The buy side, as vital participants and experts in capital markets, must have a strong global voice. Current issues center on transparency, dark pools, liquidity, the rise of high-frequency trading, regulatory interventions in stressed market conditions and increasing regulation of derivatives markets.

Finally, we will be engaged with the issue of savings and pension systems. Funds can and do play an important role in meeting the global challenges of retirement savings. We'll look at this against the backdrop of increasing individual responsibility for retirement provision, the growth of defined contribution plans, and the role of funds in emerging national pension systems.

MME: How do you see it getting set up to operate, best?

Waters: We're already operational and, as you can see, have our four policy areas identified. We also have a strong initial membership base that is growing steadily. I'm working closely with ICI President Paul Schott Stevens and our steering committee chair, Jamie Broderick, who is managing director of J.P. Morgan Asset Management in Europe, to continue building our membership and begin fleshing out our approach to the key policy issues of the day.

MME: How will you approach the task of approaching so many different 'jurisdictions' for the fund industry worldwide?

Waters: The key is to focus our voice in the global dialogue and continue our tradition of working closely and collaboratively with fund association partners around the world, so that we stay current on issues specific to their jurisdictions and work with them as a partner to address them on behalf of the global fund industry.

MME: How do you expect this to play and work out, terms of perhaps unifying how funds are set up and operated worldwide, from mutual funds operating under the Investment Company Act of 1940 in the United States to funds operating under the Undertakings for Collective Investment in Transferable Securities Directives in Europe to funds originating in Asia under different frameworks?

Waters: Regardless of what regulatory framework funds use, they all face the common issues we identified, and addressing those will be our focus.

MME: What are ICI Global's biggest challenges?

Waters: Anytime you begin a new initiative, it is challenging. But the favorable response has been so strong: managers are embracing the vision of an organization that can speak for them on a global scale.

MME: What are you initial plans on how to address them?

Waters: Our goal right now is just to continue our running start.

MME: Why this role, for Dan Waters, after FSA and IOSCO?

Waters: I've been involved in the global dialogue on regulatory issues affecting asset management for decades, and I have known and respected the ICI and its work for many years. Having the opportunity to be part of the solution to the many challenges facing global fund managers and their investors while working with outstanding colleagues is, for me, as good as it gets.MME