Hedge funds embrace UCITS

June 14, 2010 | By Jim Kim

In Europe, the fund industry segment with the fastest growth rights now is UCITS, an acronym for Undertakings for Collective Investment in Transferable Securities.

On the surface, you might think this is a move toward traditional fund offerings. These UCITS, sometimes called NEWCITS, are mutual fund-like in some ways. As Bloomberg notes, they are required to have independent boards, custodians, administrators and auditors. The funds' leverage is regulated, as is shorting. They can, however, use derivatives to bet against markets or stocks.

The firms most actively setting up these funds are hedge funds (hedge fund news), and some wonder if they are doing so to evade heightened regulatory requirement, which may be on the way in Europe. Some see these vehicles as a way for hedge funds to maintain their strategies without having to worry about new regulations. Some call them LOCUSTS. We can all agree that they have not been tested, and that someone inevitably will try to ram hedge fund-style trading into a mutual fund. Of course that is going on in the U.S. as well.

For more:
- here's the Bloomberg article