UCITS
UCITS are open-ended collective investment schemes established and authorised pursuant to EU law, as implemented in the member states of the EU. Perceived as safe and well-regulated investments, once authorised, UCITS can be marketed and sold to retail investors globally. UCITS can invest in a diverse range of financial instruments. As the rules for permitted asset classes and governance requirements continue to evolve, UCITS continue to be a popular investment management product. Critically, by using derivatives, UCITS can generate leverage and achieve synthetic short exposure.
Our Irish and Luxembourg lawyers advise clients on the following UCITS specific requirements:
- UCITS must be able to offer redemptions at least twice a month, i.e. fortnightly. A 10% fund level gate is permitted. Redemption proceeds must be received within 14 calendar days / 10 business days of the redemption deadline.
- At least 90% of assets must be in liquid (UCITS eligible) instruments (such as listed equities, fixed income, money market instruments, regulated funds and derivatives on eligible assets or financial indices). No direct short-selling is permitted. Direct exposure to real estate and commodities is not permitted.
- No single asset can represent more than 10% of the fund's assets; holdings of more than 5% cannot in aggregate exceed 40% of the fund's assets. This is known as the "5/10/40" rule. There are certain exceptions for government issued securities and for index tracking funds.
- Temporary borrowing is limited to 10% and not permitted for investment purposes. A general leverage limit of 100% is applied (although use of value-at-risk ("VaR") to measure global exposure gives significant flexibility in this regard).
- Regulated depositaries, administrators and auditors provide independence in key support and oversight functions. No minimum investment level is applied under UCITS regulation (although funds may fix levels themselves); no investor eligibility criteria are applied.
- UCITS can be established as investment companies with variable capital (SICAVs), investment companies with fixed capital (SICAFs) or as common contractual funds (CCFs) in Luxembourg or as investment companies, unit trusts, common contractual funds (CCFs or Irish Collective Asset-management Vehicles (ICAVs) in Ireland. UCITS can operate as a standalone fund or as an umbrella fund, with multiple sub-funds with segregation of liability assets and liabilities at sub-fund level.
UCITS - A Guide for Asset Managers
Read our Guide to Undertakings for the Collective Investment in Transferable Securities ("UCITS") covering the key features of a UCITS, depositary, management company, distribution and tax considerations.
Related Contacts
Johan Terblanche
Managing PartnerLuxembourg
T: +352 28 55 12 44
