Are UCITS Still Viable in 2017?
Brexit. The ongoing Greek Crisis. Italy’s debt. All these things may make you wonder whether UCITS are worthy of investment in 2017. Although these events may be disconcerting in some respects, the fact of the matter is that UCITS remain one of the most robust and safe financial frameworks in the world right now. Specifically, with the arrival of the new UCITS 5 directive, many previous shortcomings of the framework have been addressed. Let’s take a closer look at some of the benefits of UCITS funds under the new directive, and what the implications are regarding financial uncertainties in the EU.
What are UCITS? In simple terms, a UCITS is a mutual fund based in the European Union. UCITS stands for “Undertakings for Collective Investment in Transferable Securities” and UCITS funds can be sold to any investor within the European Union under a harmonised regulatory regime. –Blackrock Investment Group
UCITS funds provide many unique advantages when compared to other types of investments. First, they provide greater transparency and protection for investors. The new depository rules regarding duties, eligibility, and liability ensure this. These rules concerning liability are particularly appealing because, in the unlikely event where fund assets are lost, depositaries are liable. A second benefit is a revised remuneration policy that encourages effective risk management. This is significant because now fund managers are further deterred from trading in riskier securities as 50% of their variable remuneration is intertwined with the very UCITS funds they manage. This harmonization of UCITS remuneration policies with those of under AIFMD (Alternative Investment Fund Management Directive) is very much welcome, as it further streamlines fiscal policy across the E.U. Third, UCITS are subject to greater controlling oversight from regulatory authorities. Now, administrative sanctions across member states are more unified and minimize the amount of gold plating needed.
Thanks to this new directive, UCITS are secure and remain the safest, most transparent way for diversified liquid investing. Investors get the benefit to investing in hedge funds while also getting much more liquidity, something that is unique to the UCITS format.
Remember, UCITS 5 is a living directive that is designed to adapt to a constantly changing financial market. As such, it is important to constanly monitor and stay up to date on how this directive changes over time.
