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Ucits – the right shape for a fund?

There is a clear incentive for big fund houses to promote the Ucits-versions of their funds: it is easy to market them internationally. For fund selectors though, the case for Ucits seems less clear-cut. However, according to a straw poll across Expert Investor Europe’s readership, most of you invest (almost) exclusively in Ucits funds. 

Arild Orgland, managing partner of Norwegian wealth management company Industrifinans, is such a Ucits-biased fund selector. “We invest almost only in Ucits-funds,” he says. “Ucits simply gives you the comfort that you can buy what you want and sell what you want when you want, and that you can do it at the same price for all clients, because you have daily pricing. So you get fair al­location and best execution.”

But liquidity is not the only reason why he prefers Ucits-regulated funds. “From a regulatory and legal point of view, Ucits is also an attractive format. We may invest in non-UCITS if they provide sufficient liquidity and we are confident with the legal and regulatory framework, however they should then also offer some additional benefits to make it worthwhile,” says Orgland (pictured right).  

Tanja Wennonen-Kärnä, senior portfolio manager at Evli Bank in Finland, is taking the same line. “Our clients can opt to invest in non-Ucits funds, but our default option is always Ucits. We use Ucits funds because they offer better protection to investors, and to ensure the liquidity and transparency of our investments.” 

Challenging the consensus

 While the main reasons for investing in Ucits-funds are of a technical nature, there seems to be strong agreement about the merits of the format. But is it sensible to restrict yourself completely to Ucits?

Jeroen Vetter, who runs an investment management consultancy in the Netherlands, thinks excluding non-Ucits funds from your selection process is arbitrary and unnecessarily restrictive. “There are a lot of liquid funds which are not Ucits-regulated, but are very liquid,” Vetter argues. “Excluding funds just because they are not Ucits-regulated is a bit like a company only hiring white people.”

Part of the Bonhill Group.