AIFMD v UCITS

The JC’s Reg and Leg resource™ →Go uptown Index: Click ᐅ to expand: Regulation Index: Click ᐅ to expand: Regulation Legislation Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

As a comparison piece to our showdown between EMIR v MIFID we offer you our UCITS v AIFMD showdown. These are of course the flagship regulations for EU for investment fund regulation.

Generally speaking, UCITS is for retail investment funds — think granddad dandling grandchildren on knees, nostalgic glamour-glow photos of children blowing on dandelions and so on — and is, therefore, more restrictive than AIFMD, which is for hedge funds, private equity funds, venture capital funds and collective investment schemes that are not in scope for UCITS, because wistful granddads cannot reasonably invest in them.

That said investment funds are investment funds however much money you have to put in them so there are some commonalities between the regimes — the need, for example, to have a depositary to hold cash and assets in either case — where there are equivalent provisions, AIFMD’s tend to be laxer, and more contract-outable-from.

See also

• AIFMD
• UCITS
• MIFID v EMIR

That table in full

Comparison between UCITS and AIFMD

Aspect	UCITS	AIFMD
Regulatory Objective	Harmonising regulation for retail investment funds.	Regulate managers of alternative investment funds — aka hedge funds: investment funds that are not available to retail investors, and therefore are out of scope for UCITS because (among other reasons) their minimum investment requirements are so high as to imply significant sophistication.
Scope	Covers retail investment funds (mutual funds)	Covers managers of alternative investment funds (hedge funds, private equity funds, etc.)
Investor Eligibility	Open to retail investors	Typically restricted to professional and institutional investors
Investment Restrictions	Imposes strict diversification and liquidity requirements,	Allows for a broader range of investment strategies and asset classes
Leverage	Limited leverage allowed	Allows for greater leverage in certain circumstances
Risk Management	Requires robust risk management processes	Requires managers to implement risk management systems and procedures
Depositary Requirement	Mandatory appointment of a depositary for safekeeping of assets	Mandatory appointment of a depositary for monitoring cash flows and oversight of assets
Passporting	UCITS funds can be marketed across EU member states under a single authorization	AIFMD allows for the passporting of alternative investment fund managers
Marketing Restrictions	UCITS can be marketed to retail investors throughout the EU	Marketing of AIFs may be subject to certain restrictions and requirements
Transparency	Emphasizes disclosure and transparency to investors	Requires disclosure to investors and regulators, but may be less stringent than UCITS
Liquidity Management	Emphasizes liquidity management to meet redemption demands	Requires managers to implement liquidity management processes tailored to the fund's strategy
Regulatory Authority	National competent authorities (NCAs) and ESMA for certain aspects	National competent authorities (NCAs) for regulation and oversight