What is UCITS? (2024)

FAQs

What is the difference between ETFs and UCITS? ›

For ETFs using derivatives, exposure should be covered with collateral valued at 90% of NAV and meet minimum risk management standards. UCITS funds cannot use leverage other than on a temporary basis and up to a maximum of 10% of their NAV.

UCITS stands for Undertakings for the Collective Investment in Transferable Securities. It is a regulatory framework that allows for the sale of cross-boundary mutual funds for EU member states. UCITS were created so that retail investors have transparent, regulated, and cross-border investment opportunities.

The main differences arise in relation to concentration limits, where greater flexibility is permitted in the case of non-UCITS funds.

U.S. investors, for example, can buy shares of UCITS through U.S.-based fund managers, although local, EU-based money managers run the funds.

Costs: UCITS funds can have higher costs due to compliance and regulatory reporting requirements. Investment restrictions: Strict investment rules might limit the fund's ability to take advantage of certain market opportunities.

Tracked indices must be sufficiently diversified UCITS ETFs are identified by the “UCITS ETF” label in the fund name.

Vanguard S&P 500 UCITS ETF (VUSA)

The Fund employs a “passive management” – or indexing – investment approach, through physical acquisition of securities, designed to track the performance of the Index, a free float adjusted market capitalisation weighted index.

SICAVs are often contrasted with SICAFs. SICAFs are similar to closed-end funds in the U.S. SICAFs are an acronym for Société d'Investissem*nt à Capital Fixe. They are traded on public market exchanges and operate with a fixed number of shares. UCITS structured SICAVs are actively cross-border marketed in Europe.

Keeping assets safe

UCITS funds offer EU investors safe and easy access to savings in shares, bonds and other similar types of financial instruments from around the world. These assets are then held, not by the fund itself, but by separate and specialised companies (usually banks) known as depositaries.

At the 5% limit, the fund would require a minimum of 20 stocks (or other transferable asset) in the portfolio. If the limit is raised to 10% as per bullet point #2, 4 stocks can be held with a weighting of 10% as they do not exceed the 40% limit as per bullet point #3.

Are hedge funds UCITS? ›

UCITS hedge funds, or alternative UCITS funds, are mainly targeted for Euro- pean hedge-fund investors. Traditionally, for non-U.S. investors, hedge funds' legal domi- cile is where regulatory requirements are at a minimum, often in offshore tax havens.

Conversely, UCITS ETFs usually enjoy: Lower Withholding Taxes – on dividends due to favourable treaties with countries where they are commonly domiciled, like Ireland and Luxembourg. No Estate Taxes – They pose no U.S. estate tax exposures. Simplified Tax Reporting – They offer simplified tax reporting.

Advantages: Investor protection: High regulatory standards offer strong investor protection. Liquidity and flexibility: UCITS ETFs provide ease of trading with the added benefit of diversification.

The term “undertaking for collective investment in transferable securities” (UCITS) should not require much explanation, it speaks for itself: It is an undertaking for collective investment (or “investment fund”) which invests in securities, i.e. in stocks, bonds, stocks and bonds, short term treasury instruments and ...