The European Securities and Markets Authority (Esma) last
week called for all hedging arrangements at share class level
– with the exception of currency risk hedging
– to be set up as separate funds or sub-funds.
The opinion,
published on January 30, discusses the extent to which
different types of share classes of the same Undertakings for
Collective Investment in Transferable Securities (Ucits) funds
can differ from one another.
It targets four key areas in which Esma believes more
consistency is required on the issue: a common investment
objective, non-contagion, pre-determination and
transparency.
Will Esma's opinion hit hedging
hard?Perhaps most importantly, the opinion sheds light
on the use of derivatives within share classes. According to
the opinion, Esma will still allow for currency risk
hedging on the basis that it enables investors from member
states with differing currencies to "participate…in the
same performance...