UCITS

UCITS stands for Undertakings for the Collective Investment in Transferable Securities. It is a regulatory framework of the European Union that creates a harmonized regime for the management and marketing of collective investment schemes to retail investors within the EU. Introduced in 1985, the UCITS framework has been updated by successive directives (UCITS I–V) to broaden scope and strengthen investor protection and cross-border distribution. The framework allows a fund authorized in one Member State to be marketed to investors in other Member States through a single authorization, a process known as passporting.

Key requirements include rules on eligible assets (primarily transferable securities and money-market instruments), diversification limits, liquidity requirements, risk management, valuation, and accounting. UCITS funds must appoint an authorized UCITS management company and a depositary (custodian) bank that holds fund assets and provides oversight. The management company handles day-to-day administration and compliance with investment restrictions; the depositary protects investors by overseeing safekeeping and asset custody, as well as certain fiduciary duties.

UCITS funds may employ derivatives for hedging and efficient portfolio management, subject to rules on risk and leverage. The regime also mandates regular reporting and standardized investor disclosures for retail investors to ensure transparency. The UCITS framework has become a global benchmark, with many non-EU jurisdictions aligning their rules to permit marketing of UCITS funds abroad or adopting UCITS-compliant structures to attract investors. Cross-border marketing remains a central benefit, enabling a single authorization to sell funds across EU member states, subject to ongoing supervision by national competent authorities. UCITS V, implemented in the mid-2010s, strengthened governance and depositary oversight, clarifying liabilities and enhancing investor protection.