What is UCITS? (2024)

FAQs

What is the difference between ETF and UCITS? ›

For ETFs using derivatives, exposure should be covered with collateral valued at 90% of NAV and meet minimum risk management standards. UCITS funds cannot use leverage other than on a temporary basis and up to a maximum of 10% of their NAV.

Like many investments, you can buy UCITS funds through a broker that offers the service. U.S. citizens cannot invest in UCITS without using an authorized broker.

UCITS (Undertakings for Collective Investment in Transferable Securities). Defined as organizations, whose sole purpose is to collectively invest - in securities and other financial assets - capital raised by the public and which operate under the principle of risk management.

Vanguard S&P 500 UCITS ETF (VUSA)

The Fund employs a “passive management” – or indexing – investment approach, through physical acquisition of securities, designed to track the performance of the Index, a free float adjusted market capitalisation weighted index.

Tracked indices must be sufficiently diversified UCITS ETFs are identified by the “UCITS ETF” label in the fund name. This enables investors to quickly identify funds that are subject to the UCITS regulatory framework.

No single asset can represent more than 10% of the fund's assets; holdings of more than 5% cannot in aggregate exceed 40% of the fund's assets. This is known as the "5/10/40" rule.

Cost Savings – Many of the fixed overhead costs of a platform are allocated to each of the underlying sub-funds therefore lowering costs to the investor. In addition, most UCITS platforms are able to negotiate lower costs with service providers due to operational efficiencies.

A UCITS must invest its funds in transferable securities and other liquid assets. This includes transferable securities admitted or dealt on a regulated market, investment funds, financial derivative instruments, cash and specific money market instruments. Uncovered short sales and borrowings are not permitted.

This has been enshrined in what is commonly known as the 5/10/40 rule which is that a UCITS may invest no more than 10% of its net assets in transferable securities or money market instruments issued by the same body, provided that the total value of transferable securities or money market instruments held in issuing ...

What is the 35 rule for UCITS? ›

The “5/10/40” rule is no longer applicable in these situations. Also, the 20% limit may be raised to 35% for a single issuer within the index in exceptional circ*mstances. UCITS may also gain exposure to a financial index through the use of financial derivative instruments (“FDI”).

A UCITS may acquire no more than 25% of the units/shares of the underlying UCITS or UCI (or the aggregate amount invested in one or more sub-funds of an umbrella UCITS).

A UCITS must limit Ancillary Liquid Assets to bank deposits at sight, such as cash held in current accounts with a bank accessible at any time. Ancillary Liquid Assets held are limited to 20% of the net assets of a UCITS.

Capital base

The net assets of an FCP may not be less than EUR 1,250,000. This minimum must be reached within a period of six months following its authorisation.

As is the case with a UCITS, a retail non-UCITS must invest at least 90 per cent of its assets in listed or exchange-traded securities. The main differences arise in relation to concentration limits, where greater flexibility is permitted in the case of non-UCITS funds.

Tax Benefits For Non-U.S. Investors Outweigh Higher Costs: UCITS ETFs often offer more favourable tax treatments, lower withholding taxes on dividends, no U.S. estate tax, and simplified tax reporting, in most cases outweighing the cost considerations.

UCITS or 'undertakings for the collective investment in transferable securities' are investment funds regulated at European Union level. They account for around 75% of all collective investments by small investors in Europe. The legislative instrument covering these funds is Directive 2014/91/EU.

Cost Savings – Many of the fixed overhead costs of a platform are allocated to each of the underlying sub-funds therefore lowering costs to the investor. In addition, most UCITS platforms are able to negotiate lower costs with service providers due to operational efficiencies.