UCITS – the World’s Favourite Fund Structure?
News this month marks a landmark point for UCITS, with assets invested in European mutual funds hitting a record high this year and for the first time passing the €10tn mark.
Originally designed to provide a single European framework for funds domiciled in one country to be sold across the bloc, UCITS have been embraced by both institutional and retail investors alike. Their stringent terms of portfolio composition, liquidity and transparency have cemented UCITS role as a safe and well-regulated investment option, and a logical choice for investors.
But it’s not just European fund houses that have benefited. For those outside the bloc looking to break in, UCITS’ speed to market, cost efficiency and regulatory compliance oversight have opened the door. Today, it is US fund managers that are the largest country of origin in Luxembourg, which alongside Dublin is the biggest domicile for UCITS funds.
But one of the greatest and perhaps originally unexpected achievements of UCITS has been their success beyond Europe. Chile, for example, is one of the largest destinations for UCITS funds, and they also have a significant presence across Asia. What started as a framework for Europe has become an international gold standard of fund regulation around the world.
Throughout their history, the regulatory framework has continually evolved, from the original UCITS I back in 1985, through to UCITS V in 2016. In parallel with this, we’ve also seen the growth and innovation of new fund structures and regulatory regimes for alternative investments, alongside the massive growth in ETFs.
So are UCITS the world’s favourite fund structure? Perhaps, but what is certain is that UCITS are here to stay and will continue to move forward, demanding the asset management industry to adapt and change in their wake.