UCITS
 UCITS are a set European Union Directives that
allow collective investment schemes to operate
liberally throughout the E...
 Different marketing regulations in member
states
 Difficulty in cross border marketing of UCITS
 Draft to amend 1985 D...
 UCITS IV proposal approved in 2009
 Update to UCITS III with some amendments
 basis for the proposed framework of the
...
 greater transparency
 improved liquidity
 enhanced risk management
 better investment strategies
 Redemption Settlem...
 Allowing investment opportunities using
different strategies without distorting returns
 Leverage may be used
 Sophist...
 Asset managers view it as a burden
 Costly exercise, resource draining but very
little benefits
 Failed to achieve the...
 Non-Sophisticated Strategies may be used and
simple in the long run
 Long Only Index Replicating Funds
 Money Market F...
 UCITS - Sophisticated Strategies include:
 Index Tracking Funds – reproduce arrangement of an
eligible index
 Eligible...
 Long/Short Equity purchasing market listed
investments
 Physical shorting is not allowed
 Subject to certain limits
 ...
 invest in other UCITS funds and Eligible Undertakings for
Collective Investments (UCIs)
 UCITS Fund of Funds allowed to...
 Investing in Commodities through Exchange
Traded Funds
 Investing in Commodities through an Eligible
Index
 Commodity ...
 At least one feeder
 Must be approved by the EU member state
 Application to the Regulator with key
information disclo...
The following should be in place for structure to
be adequate:
 Prime Broker
 Custodian – protects assets
 Management C...
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Undertakings for collective investment in transferable securities

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This presentation serves as study notes for the e-learning material titled: "South African Hedge funds and International Developments"

These notes focus on UCITS IV and its Impact on the Industry.

http://www.hedgefund-sa.co.za/ucits

Published in: Economy & Finance, Business
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Undertakings for collective investment in transferable securities

  1. 1. UCITS
  2. 2.  UCITS are a set European Union Directives that allow collective investment schemes to operate liberally throughout the EU  single authorization from one member state  further regulatory requirements have been enforced by member states, obstructing free operation with the aim of protecting local asset managers.  original UCITS Directive compiled in 1985  Hope to achieve standard legislation within the EU  One step towards achieving a single EU financial services market
  3. 3.  Different marketing regulations in member states  Difficulty in cross border marketing of UCITS  Draft to amend 1985 Directives accepted in 2001  Birth of UCITS III which is currently on force  Fund managers may be registered in domestic country
  4. 4.  UCITS IV proposal approved in 2009  Update to UCITS III with some amendments  basis for the proposed framework of the “Regulation of South African Hedge Funds”  May help in the understanding of the South African framework
  5. 5.  greater transparency  improved liquidity  enhanced risk management  better investment strategies  Redemption Settlement Periods no longer than 14 days  Leverage limits  Investor protection  Simplification of procedures
  6. 6.  Allowing investment opportunities using different strategies without distorting returns  Leverage may be used  Sophisticated strategies may be used  Cross border distribution opportunities  Cost effective  No need to register with every EU state  Investors may find UCITS effective  Help in diversification
  7. 7.  Asset managers view it as a burden  Costly exercise, resource draining but very little benefits  Failed to achieve the advertised efficiencies  Managers operating below par  Tax systems in different states hindering efficiencies  Not all states have implemented UCITS IV
  8. 8.  Non-Sophisticated Strategies may be used and simple in the long run  Long Only Index Replicating Funds  Money Market Funds  Long Only Funds  examples of long only funds  Equities  Corporate Bonds  Government Bonds  Money market instruments and deposits.
  9. 9.  UCITS - Sophisticated Strategies include:  Index Tracking Funds – reproduce arrangement of an eligible index  Eligible index must be  Adequately diversified. Low correlation between each other  Calculated adequately  Published in public domain  Managed as a separate entity  Hedge fund indices may be considered as eligible
  10. 10.  Long/Short Equity purchasing market listed investments  Physical shorting is not allowed  Subject to certain limits  Exposure to Non-Eligible Assets  Swaps may allow Index Tracking Funds to invest in non-eligible assets  Extra valuation policies may be required
  11. 11.  invest in other UCITS funds and Eligible Undertakings for Collective Investments (UCIs)  UCITS Fund of Funds allowed to invest in unregulated investments subject to limits  may invest in other compartments of that same umbrella structure  may not invest in any other fund which invests more than 10% of its assets in other funds  disclosure of management fees charged by the underlying funds  Restrictions:  At most 10% of non-voting shares  debt securities or money market instruments of a single issuing body  At most 25% of the interest of an underlying UCITS fund or Eligible UCI  certain exemptions
  12. 12.  Investing in Commodities through Exchange Traded Funds  Investing in Commodities through an Eligible Index  Commodity Trading Advisor Funds
  13. 13.  At least one feeder  Must be approved by the EU member state  Application to the Regulator with key information disclosed  KIIDs presented  Agreements, rules of conduct between master and feeder funds may be located in different EU states
  14. 14. The following should be in place for structure to be adequate:  Prime Broker  Custodian – protects assets  Management Company – management of funds and investments  Auditor – auditing annual reports  Administrator – shareholders and fund’s Registrar  Directors – determining strategy

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