What Is UCITS?
The Undertakings for the Collective Investment in Transferable Securities (UCITS) is a regulatory framework of the European Commission that creates a harmonized regime throughout Europe for the management and sale of mutual funds. UCITS funds can be registered in Europe and sold to investors worldwide using unified regulatory and investor protection requirements. UCITS fund providers who meet the standards are exempt from national regulation in individual European countries.
In everyday usage, a UCITS is a mutual fund based in the European Union. UCITS funds are perceived as safe and well-regulated investments and are popular in Europe, South America and Asia among investors who prefer not to invest in a single public limited company but rather among diversified unit trusts spread out within the European Union.
History of UCITS
The first UCITS Directive was adopted on Dec. 20, 1985, with a stated aim of facilitating cross-border offerings of investment funds to retail investors. In the early 1990s, proposals for modifications to the directive were made but never fully adopted. As such, there is no UCITS II. However, in 2002, following discussions among member countries, two new Directives were adopted. Directives 2001/107/EC and 2001/108/EC, together known as UCITS III, broadened the investment spectrum of UCITS funds and relaxed some restrictions for index funds.
UCITS IV, or Directive 2009/65/EC, brought about further technical changes and was adopted in July 2011. Finally, UCITS V, or Directive 2014/91/EU, which went into force in March 2016, aligns fund depositories' duties and responsibilities and fund managers' remuneration requirements with those of the Alternative Investment Fund Managers Directive (AIFMD).
Examples of UCITS Funds
Because they are seen as very safe and well-regulated, UCITS funds are very popular investments. According to the European Commission, they account for around 75% of all collective investments by small investors in Europe. Many mutual fund providers use an expression such as "UCITS-compliant" as part of their marketing strategy. While the funds are regulated in Europe, buyers from all over the world can invest in UCITS funds.
At the end of 2017, the total net assets of European investment funds reached EUR 15.6 trillion. Close to 32,000 of these funds were UCITS and about 28,300 of these funds were Alternative Investment Funds, according to the European Fund and Asset Management Association.