In 1985, the European regulatory framework for investment funds was adopted under the name of the UCITS Directive (Undertakings for Collective Investment in Transferrable Securities Directive). Authorised investment funds receive a UCITS passport and their units may be distributed in other member states. UCITS are subject to disclosure and investment rules to ensure investor protection.
Investment funds provide investors with an easy means to achieve diversified portfolios in the money, bond and equity markets. Households make extensive use of UCITS to supplement retirement savings under the first and second pillar. But pension funds and insurance companies also make considerable allocations to these harmonised investment funds. Multinational companies are increasingly looking at UCITS as an asset-pooling vehicle for their pension schemes.
As from 2011, UCITS IV 1 will take effect. The revised regime aims to enhance the efficiency, flexibility and transparency of the investment fund industry. UCITS IV facilitates mergers and asset pooling by investment funds. It also introduces a ‘management company passport’, allowing a management company to be located in a different country from the investment fund. To increase transparency, investment funds have to provide investors with a concise document containing ‘key investor information’.
EFRP has been supportive of the changes in UCITS IV. Higher efficiency and improved transparency about management fees will benefit both retail and wholesale investors in terms of lower costs.
See also:
EFRP Response – EU Commission Financial Services – Expert Group Reports (July 2006) – October 2006
EFRP Response – EU Commission Green Paper on investment funds – December 2005
1 Directive on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (recast)
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