Europe's chance to put right Ucits errors

Author: | Published: 1 Jun 2005

When the European Commission reviews legislation covering Ucits (undertakings for collective investment in transferable securities) later this year, lawmakers should use the opportunity to put right some of the shortcomings of previous legislation stretching back more than two decades. Above all, the Commission should seek to remove restrictions that prevent Ucits from adopting investment techniques that allow gains to be made in falling as well as rising markets (which have been used successfully by hedge funds during the prolonged equity bear market), denying Ucits investors potentially better and often less risky returns.

The original Ucits directive, Directive 85/611/EEC (Ucits I) is nearly 20 years old, and was an early part of the drive to create an internal capital market in Europe. Its objective was to create a common market for open-ended collective investment undertakings (funds) that invested in transferable securities on the principle of risk spreading. It enabled funds established in a member state, whose investments...