Get the facts: We debunk some of the myths surrounding UCITS

Europe has one of the world's leading savings brands. Europe's UCITS (Undertakings for Collective Investment in Transferable Securities) mutual fund framework gives citizens who want to invest their money on the stock market a secure, well-regulated way of doing so. The proof of this is that UCITS funds now have € 8 trillion of assets under management. A major reason for UCITS' success is the clarity of the rules. But these rules don’t always suit some stakeholders and this has led to some myths and misunderstandings. Here, Tilman Lueder, head of the Commission's asset management unit, debunks some of those myths. 

Myth: UCITS can only invest in European assets

UCITS can only invest in certain types of assets: listed shares, corporate and sovereign bonds, cash deposits, money market instruments and some types of derivatives. The assets can be located in most countries around the world provided they meet the rules' requirements. The basic requirements are that they must be able to be bought and sold at all times at a price that is always clear.

Myth: Member States tailor their rules according to their national priorities

The UCITS rules come from the UCITS Directive and therefore apply in the same way in all Member States. Apart from a small number of areas where Member States have limited discretion, the rules are uniform. This uniformity is one of the secrets of UCITS' success. EU citizens can be sure that all UCITS conform to the same rules, regardless of which Member State the manager is based in.

Myth: UCITS forces fund managers to set up funds in Luxembourg and Dublin only

UCITS managers are free to set up in any Member State they choose. Luxembourg and Dublin are popular domiciles but there is nothing to force managers to set up there. UCITS fund managers and the depositaries, companies that keep investors' assets safe, must be based in the same Member State.

Myth: UCITS forces their managers to merge the funds they offer as part of an insurance policy

Insurance companies often use UCITS as investments for their savings policies. But the rules on insurance do not affect UCITS' operations. It is the UCITS fund manager who decides whether to merge funds. Often this happens because funds become too small to run in the best interests of their investors.

Myth: UCITS forces their managers to close down equity funds and convert them into annuity-based products

The UCITS Directive does not require this. UCITS must stick to the investment strategy that has been set out to investors when they are sold to them. This is important as it gives investors the confidence that the UCITS they have bought will not drift away from what they were told the fund would do and start investing in completely different assets. If investors want to change to a completely different type of UCITS they have to take their money out and put it into a different fund.

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