UCITS: Difference between revisions

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From Article 1(2) of {{eudirective|85|611|EEC}} [http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1985L0611:20080320:EN:PDF Council Directive (85/611/EEC)] of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ({{tag|UCITS}})
{{anat|UCITS}}
<small>''Not to be confused with [[AIF]]s:Compare and contrast '''[[alternative investment fund]]s''' regulated under [[AIFMD]], which are professionals-only funds ([[hedge fund]]s etc). The regulations are in some ways converging, but there are still a lot of differences in the types of risks that an [[AIF]] can take compared to a [[UCITS]]. See also: [[Depositary comparison under AIFMD and UCITS]]'' </small>


{{box|For the purposes of this Directive, and subject to Article 2, {{tag|UCITS}} shall be undertakings:
[[UCITS]] - or "'''[[undertakings for the collective investment in transferable securities]]'''" - are regulated European investment funds, generally aimed at '''retail''' investors.
*the sole object of which is the collective investment in transferable securities and/or in other [[UCITS liquid financial assets|liquid financial assets]] referred to in [[UCITS liquid financial assets|Article 19(1)]] of capital raised from the public and which operates on the principle of risk-spreading and
*the units of which are, at the request of holders, re-purchased or redeemed, directly or indirectly, out of those undertakings' assets. Action taken by a {{tag|UCITS}} to ensure that the [[stock exchange]] value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such re-purchase or redemption.}}


==={{tag|UCITS V}}===
[[UCITS]] funds must meet strict criteria as to how they are set up, managed and marketed, and as to the portfolio of asset a [[UCITS]] fund is allowed to invest in: There are concentration limits and other criteria which ensure diversity of risk; assets must be liquid, there should be very limited use of [[leverage]] and the fund must ensure it has diverse exposure to trading counterparties, banks and so on.
On 23 July 2014 the {{tag|European Union}} adopted {{eudirective|2014|91|EU}} on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ({{tag|UCITS}}) as regards depositary functions, remuneration policies and sanctions.
 
The most recent UCITS update is [[UCITS V]], ({{eudirective|2014|91|EU}}), which has specific implications for Custodians and depositaries, and was driven in part by the fallout from [[Madoff]]. But the bulk of [[UCITS IV]], set out at {{eudirective|2009|65|EC}}, is still in force.
 
===[[UCITS IV]]===
UCITS IV is the common name for {{eudirective|2009|65|EC}} passed by the European Parliament and of the Council of 13 July 2009. It was subsequently amended by...
 
===[[UCITS V]]===
On 23 July 2014 the [[European Union]] adopted {{eudirective|2014|91|EU}} on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ([[UCITS]]) as regards depositary functions, remuneration policies and sanctions.


This directive introduces new rules on UCITS depositaries, such as the entities eligible to assume this role, their tasks, delegation arrangements and the depositaries’ liability as well as general remuneration principles that apply to fund managers.
This directive introduces new rules on UCITS depositaries, such as the entities eligible to assume this role, their tasks, delegation arrangements and the depositaries’ liability as well as general remuneration principles that apply to fund managers.


The {{tag|depositary}} as a specific function under {{tag|UCITS}} legislation (rather as it does under {{tag|AIFMD}}). The depositary may delegate its functions to a third party {{tag|custodian}} - as to which see {{tag|sub-custodian}}.
The [[depositary]] as a specific function under [[UCITS]] legislation (rather as it does under [[AIFMD]]). The depositary may delegate its functions to a third party [[custodian]] - as to which see {{tag|sub-custodian}}.


===[[Rehypothecation]] gets me down===
{{Ucits and reuse}}
===See Also===
===See Also===
*[[UCITS fair value]]
*[[UCITS investments]]
*[[UCITS liquid financial assets]]
*[[UCITS eligibility criteria for derivative counterparties]]
*[[UCITS daily valuation]]
*[[UCITS]]
*{{tag|UCITS}}

Latest revision as of 13:30, 14 August 2024

UCITS Anatomy™

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Not to be confused with AIFs:Compare and contrast alternative investment funds regulated under AIFMD, which are professionals-only funds (hedge funds etc). The regulations are in some ways converging, but there are still a lot of differences in the types of risks that an AIF can take compared to a UCITS. See also: Depositary comparison under AIFMD and UCITS

UCITS - or "undertakings for the collective investment in transferable securities" - are regulated European investment funds, generally aimed at retail investors.

UCITS funds must meet strict criteria as to how they are set up, managed and marketed, and as to the portfolio of asset a UCITS fund is allowed to invest in: There are concentration limits and other criteria which ensure diversity of risk; assets must be liquid, there should be very limited use of leverage and the fund must ensure it has diverse exposure to trading counterparties, banks and so on.

The most recent UCITS update is UCITS V, (2014/91/EU (EUR Lex)), which has specific implications for Custodians and depositaries, and was driven in part by the fallout from Madoff. But the bulk of UCITS IV, set out at 2009/65/EC (EUR Lex), is still in force.

UCITS IV

UCITS IV is the common name for 2009/65/EC (EUR Lex) passed by the European Parliament and of the Council of 13 July 2009. It was subsequently amended by...

UCITS V

On 23 July 2014 the European Union adopted 2014/91/EU (EUR Lex) on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions.

This directive introduces new rules on UCITS depositaries, such as the entities eligible to assume this role, their tasks, delegation arrangements and the depositaries’ liability as well as general remuneration principles that apply to fund managers.

The depositary as a specific function under UCITS legislation (rather as it does under AIFMD). The depositary may delegate its functions to a third party custodian - as to which see sub-custodian.

Rehypothecation gets me down

Financial instruments held in custody for a UCITS V fund must be segregated, clearly identifiable in the custodian’s books and records as belonging to the UCITS and critically the depositary (or its delegate[1]) may not rehypothecate those assets for its own account.[2]

A UCITS canre-use” assets for its own account on certain conditions, such as that the re-use benefits the UCITS and is in the interests of unit-holders is covered by high quality, liquid collateral under a title transfer collateral arrangement, equal at least to the market value of the reused assets plus a premium. This prohibits PB-style re-hypothecation (which is of course allowed under AIFMD structures but allows UCITS to engage in securities lending.

See Also

  1. If it has delegated the custody function, like.
  2. ESMA opinion on the subject. See also UCITS V Art. 22(7). Good note on it also from Matheson here.