AIFMD will help ensure Ucits remains simple, says Schroders Investment Management
AIFMD will help preserve the simplicity of Ucits, according to the chief executive of Schroders Investment Management in London, speaking at the ALFI Global Distribution Conference in Luxembourg.
“There has been much debate about the complexity of instruments in Ucits and considerable talk about tightening up the eligibility of assets available to Ucits managers. However, I do believe the AIFMD will lead to some of the more complex products being transferred from Ucits to AIFMs,” said Massimo Tosato of Schroders Investment Management.
There is speculation AIFMD, which will enable AIFMs to market more freely complex products across the EU, could be a challenge to Ucits absolute return vehicles - which historically have adopted fairly vanilla and liquid strategies. Furthermore, AIFMD-compliant funds’ added investor protections could also incentivise investors to allocate at the expense of Ucits.
Regulators have grown alarmed at some of the products being shoehorned into Ucits. The European Securities and Markets Authority (ESMA) recently clamped down on Ucits Commodity Trading Advisors (CTAs) resulting in some managers rethinking their strategies or in the case of Cantab Capital Partners shuttering their Ucits CTA fund.
A number of market participants have debated whether regulators will force Ucits to split into “complex” and “non-complex.” This, said Tosato, was too simplistic. “A lot of strategies in Ucits may be complex and hard to understand but not risky to the end-investors,” he said.
Nonetheless, some experts express alarm about the liquidity of complex instruments available in Ucits and have warned gating or a suspension of redemptions in the event of a blow up would irreparably damage the Ucits brand.