16/05/2011
By Matt Ritchie
The European Fund and Asset Management Association has published a report on the evolving investment strategies of UCITS, finding the current legislative framework is robust and provides strong retail investor protection.
Announcing the report’s publication, EFAMA said the universe and strategies are evolving, driven by investor demand for risk reduction and return enhancement.
The Association said that the growing demand for and availability of products using derivative techniques to generate absolute returns, commonly referred to as ‘newcits’, has attracted the attention of regulators who have expressed reservations regarding derivative use and the sophistication of investment strategies.
A workgroup was convened to look into regulators’ concerns, determining newcits are neither new products nor a new category of funds. Rather, the research found newcits are UCITS that can be described as aiming to actively manage the risk-return trade-off.
EFAMA director general, Peter De Proft, said that the ‘newcits’ label was coined by the media, and urged industry and regulators against adopting the term.
“We do not believe that it is necessary or beneficial to have a specific label for these funds. The universe of UCITS is evolving but this is encompassed by the UCITS regulatory framework. Moreover, the regulatory requirements and supervisory tools are being developed, especially under the UCITS IV framework, which enters into force on 1 July 2011,” De Proft said.
EFAMA’s report can be accessed here.
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