I sat in a seminar the other day where UCITS and more specifically Alternative UCITS were discussed and it became quite clear to me that there were a few misconceptions flying around. I just wish to clarify a few points:
- Purpose: the UCITS regulation was introduced to passport funds that are intended to retail distribution. No surprises that it does not naturally fit any type of strategies
- Liquidity: UCITS funds do not have to offer daily liquidity. Weekly or bi-monthly are perfectly acceptable
- Risk reporting: UCITS funds have to make sure they comply with the portfolio and risk rules as defined by the directive. They need to produce and store documents that prove this daily compliance. It is also critical to have some procedure in place to make sure breaches are handled as regulation requires and eventually reported as the case may be.
- Liquidity: is not 100% guaranteed with UCITS; they can suspend redemption and “gate” if circumstances dictate
- Security: some UCITS funds have turned sour…. there is no such thing as a total guarantee.