Later this month, the Committee of European Securities Regulators is expected to clarify its guidelines on whether Ucits funds are allowed to physically short stock, rather than simply building short positions via derivatives. And this could be one of the most important decisions taken by the EU in some time.

Shorting - an investment strategy where investors borrow shares in the hopes of seeing the price drop and then repaying the loan for less later - has been one of the highlights of 2008. Mass-adopted, short selling has quietly become an investment phenomenon. Then, the regulator came in and made some "adjustments" to the short selling rules. Shorting, in its new form, still prevails - as of now.

Now, a new report states that unless restrictions on shorting, leverage and the use of derivatives are relaxed, the massively popular Ucits regime will suffer massively. According to a media report citing a survey from Create Research and RBC Dexia, some 60 per cent of fund managers believe regulatory restrictions imposed on them are "onerous," particularly when long/short investment strategies are experiencing "explosive growth."

The report adds that the Ucits structure has become so successful that the US Department of the Treasury and the Investment Company Institute, the trade association for the USD 12,000 billion US mutual fund industry, have started lobbying for a fund structure to compete internationally against Ucits.

But it goes without saying that if investment choices are taken away from institutional investors, the famous Ucits brand will perhaps become like an aged rock star, suffering a mid-life crisis.