Terms

Undertakings for Collective Investment in Transferable Securities

Undertakings for Collective Investment in Transferable Securities

Undertakings for Collective Investment in Transferable Securities (UCITS) is the European Commission’s regulatory framework for managing and selling mutual funds. UCITS funds can be registered and sold in any EU country using unified regulatory and investor protection requirements.

UCITS is similar to a mutual fund in the U.S. They are registered in EU countries and regulated by the member states where they are registered. The European Commission provides guidance to ensure these investment instruments are available and safe for EU citizens.

UCITS funds are popular among investors in Europe, South America, and Asia who prefer diversified unit trusts within their countries. They account for about 75% of small investors’ collective investments in Europe. Many mutual fund providers use "UCITS-compliant" as part of their marketing strategy. While the funds are regulated in Europe, buyers from around the world can invest in EU UCITS funds if allowed by their country’s securities laws.

Key Takeaways:

– UCITS stands for Undertakings for the Collective Investment in Transferable Securities.

– It is a regulatory framework that allows for the sale of cross-border mutual funds in EU member states.

– UCITS were created to provide transparent, regulated, and cross-border investment opportunities for retail investors.

– UCITS funds are perceived as safe and well-regulated investments and are popular among investors looking to invest across Europe.

UCITS versions use Roman numerals to indicate revisions. The first UCITS directive was adopted on Dec. 20, 1985. In the early 1990s, proposals for modifications to the directive were made but never fully adopted. UCITS are also available in countries outside the EU, such as South Africa, Latin America, and Australia.

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In 2002, two new directives, known as UCITS III, broadened the investment spectrum of UCITS funds and relaxed some restrictions for index funds. UCITS IV brought about further technical changes and was adopted in July 2011. UCITS V aligns fund depositories’ duties and responsibilities and fund managers’ remuneration requirements with those of the Alternative Investment Fund Managers Directive (AIFMD).

If you buy into a UCITS through a broker, the broker doesn’t manage the fund. It is managed by the company in the EU.

Not all directives receive a version number or designation. Sometimes, several are combined into the latest numbered version.

UCITS, which stands for Undertaking for Collective Investment in Transferable Securities, is a regulatory framework for mutual funds in the EU.

An exchange-traded fund (ETF) that is UCITS compliant abides by the UCITS framework for funds based and managed in the EU.

You can buy UCITS funds through a broker that offers the service. U.S. citizens must use an authorized broker to invest in UCITS.

Non-UCITS funds do not comply with UCITS guidelines and are likely not open-ended and liquid.

Undertakings for collective investment in transferable securities is a regulatory framework in the European Union that creates standards for funds to follow. Funds following these guidelines are considered to be UCITS compliant, designed with retail investors in mind.

The standards were created to give EU members transparent, regulated, and diverse investment instruments and opportunities.

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