UCITS

UCITS stands for Undertakings for Collective Investment in Transferable Securities, an EU directive first adopted in 1985 and updated several times since. A fund authorised as a UCITS must follow common rules: it may invest only in eligible, mostly liquid assets; it must be diversified, with limits on how much it holds in any single issuer; its use of leverage and derivatives is restricted; its assets must be kept by an independent depositary; investors must be able to redeem regularly, in practice usually daily; and it must publish standardised documents, including a key information document.

The main practical benefit is the passport: once authorised in one EU country, a UCITS can be marketed to retail investors across the European Economic Area without full approval in each. This is why so many funds are domiciled in Ireland or Luxembourg and sold throughout Europe. UCITS status describes a regulatory structure; it is not a guarantee against losses, and a UCITS equity fund can fall sharply with its market. The UK kept an equivalent ‘UK UCITS’ regime after Brexit, and the rough US counterpart is a fund registered under the Investment Company Act of 1940.