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UCITS - Collective fine-tuning

Thursday 10 June 2010 - by Theo Lartey

Ucits IV has not yet been implemented, but work on Ucits V has already been flagged as a priority for the European Commission in 2011. Theo Lartey takes a look at what the updated directive may contain

It is 25 years since the European Union adopted the Undertakings for Collective Investment in Transferable Securities Directive; designed to allow collective investment funds to operate across the member states.

Now member states are preparing for the implementation of Ucits IV in July 2011. However, it appears that there is no stopping the EU directive because early next year the European Commission plans to come forward with proposals for Ucits V.

While Ucits IV aims to simplify the European fund industry, encourage cross border mergers and to cut costs, Ucits V is expected to deal mainly with depository liability. The Commission’s intention is to increase the level of investor protection and create a level playing field for Ucits investors across Europe.

European Commissioner for Internal Market Michel Barnier has designated this as a priority issue for 2011, taking on board the lessons of the Madoff fraud and the collapse of Lehman Brothers.

Commissioner spokesman Chantal Hughes says the basic idea for Ucits V is twofold; “On the one hand to amend the regime on depositaries in order to increase the level of (retail) investor protection and on the other hand to introduce in Ucits appropriate rules on remuneration”.



Ucits have seen a huge increase recently. According to the European Fund and Asset Management Association, net inflows into Ucits totalled €49bn ($59.6bn) in the first quarter of 2010, compared with €1bn ($1.2bn) in the fourth quarter of 2009. (see graph)

Ucits funds are being sold worldwide with investors in Asia, Latin America and growing traction in the US. BlackRock, JPMorgan Highbridge and York Capital are among recent adopters in the US.

In addition, there has been much speculation and a marked growth in so-called ‘Newcits’, that is, hedge fund style Ucits funds. According to research by PricewaterhouseCoopers, Europe’s asset managers have launched over 200 Newcits with many more expected to come to market.


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