Undertakings Collective Investment in Transferable Securities (UCITS)

What Is UCITS?

The Undertakings for the Collective Investment in Transferable Securities (UCITS) is a regulatory framework of the European Commission that creates a harmonized regime throughout Europe for the management and sale of mutual funds. UCITS funds can be registered in Europe and sold to investors worldwide using unified regulatory and investor protection requirements. UCITS fund providers who meet the standards are exempt from national regulation in individual European countries.

Key Takeaways

  • UCITS stands for Undertakings for the Collective Investment in Transferable Securities.
  • This refers to a regulatory framework that allows for the sale of cross-Europe mutual funds.
  • UCITS funds are perceived as safe and well-regulated investments and are popular among many investors looking to invest across Europe.
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UCITS

Understanding UCITS

In everyday usage, a UCITS is a mutual fund based in the European Union. UCITS funds are perceived as safe and well-regulated investments and are popular in Europe, South America, and Asia among investors who prefer not to invest in a single public limited company but rather among diversified unit trusts spread out within the European Union.

History of UCITS

The first UCITS Directive was adopted on Dec. 20, 1985, with a stated aim of facilitating cross-border offerings of investment funds to retail investors. In the early 1990s, proposals for modifications to the directive were made but never fully adopted. As such, there is no UCITS II. However, in 2002, following discussions among member countries, two new directives were adopted. Directives 2001/107/EC and 2001/108/EC, together known as UCITS III, broadened the investment spectrum of UCITS funds and relaxed some restrictions for index funds.

UCITS IV, or Directive 2009/65/EC, brought about further technical changes and was adopted in July 2011. Finally, UCITS V, or Directive 2014/91/EU, which went into effect in March 2016, aligns fund depositories' duties and responsibilities and fund managers' remuneration requirements with those of the Alternative Investment Fund Managers Directive (AIFMD).

Because they are seen as very safe and well-regulated, UCITS funds are very popular investments. According to the European Commission, they account for around 75% of all collective investments by small investors in Europe. Many mutual fund providers use an expression such as "UCITS-compliant" as part of their marketing strategy. While the funds are regulated in Europe, buyers from all over the world can invest in UCITS funds.

Article Sources
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  1. European Securities and Market Authority. "Fund Management." Accessed Sept. 17, 2020.

  2. European Commission. "Undertakings for Collective Investment in Transferable Securities – Amended Directive (UCITS V): Frequently Asked Questions." Accessed Sept. 17, 2020.

  3. European Commission. "Council Directive 85/611/EEC." Accessed Sept. 17, 2020.

  4. KPMG. "UCITS: Where We Are Now," Page 1. Accessed Sept. 17, 2020.

  5. The Committee of European Securities Regulators. "CESR’s Advice to the European Commission on Clarification of Definitions Concerning Eligible Assets for Investments of UCITS," Page 3. Accessed Sept. 17, 2020.

  6. European Parliament. "Cross-Border Distribution of Investment Funds," Page 2. Accessed Sept. 17, 2020.

  7. European Commission. "Investment Funds: EU Laws and Initiatives Relating to Collective Investment Funds." Accessed Sept. 17, 2020.

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