PRO

* Tried and tested structure with strong global brand

* Regulation, transparency and liquidity meet investor concerns

* Avoids uncertainty over final form of AIFM Directive

* Suits institutions with limited ability to invest in offshore structures

* Passport for distribution throughout Europe and widely accepted by regulators worldwide

* Access to broader spectrum of individual investors

* Avoids discounts to NAV suffered by many quoted alternative funds

* Many hedge fund strategies are less risky than certain long-only funds

* Platforms can help start-up Newcits with service relationships and distribution

* If funds provide full information, investors should be free to make up their own minds

ANTI

* A blow-up could damage the Ucits image

* Investors may be disappointed if returns fail to match offshore funds

* Authorities abroad may restrict access to funds using leverage or derivatives

* Some strategies cannot be replicated effectively given Ucits investment constraints

* Start-up and ongoing running costs are higher than for offshore funds

* Some international investors, such as from the US, could be restricted from investing

* Newcits funds of funds may be less diversified than traditional funds of hedge funds

* Investors could rely on the Ucits brand and skimp on due diligence

* Could disappear as quickly as 130/30 funds, the big fad of 2006-07

Download the full Hedgeweek Special Report on Hedge Funds Regulation UCITS 3 2010