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Ucits to transform alternative investment landscape

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The widespread use of Ucits by the hedge fund industry is gaining momentum, said fund managers at a seminar hosted by the Irish Funds Industry Association on behalf of the funds industry in Ireland.

Over 400 investment management professionals, influencers and decision makers attended the event to discuss the growing interest among hedge fund managers in Ucits structures.

Ireland’s position as a leading domicile for Ucits products was highlighted throughout the seminar. Ireland is a major centre for the administration of alternative investment funds, with 40 per cent of global hedge funds serviced there. Moreover, 80 per cent of Irish domiciled assets are contained within Ucits structures.

The panel of hedge fund managers discussed their motivations for establishing Ucits funds. Among these, investor demand for increased regulatory oversight, transparency and liquidity were major factors.

In volatile market conditions, many investors favoured weekly redemption rights over more restricted redemption provisions typically found in alternative products.

In addition, investors were very receptive to the high level of investor protection afforded by Ucits, as well as the requirement for independent custody and administration and the robust regulatory approval process.

In the current environment of uncertainty over the regulation of hedge funds, the regulatory certainty afforded by Ucits was a major advantage, according to the panel.

From a manager perspective, the ability to distribute Ucits throughout the EU and beyond was a major motivation. The panel also stated that a wider audience of investors is now becoming interested in Ucits, including institutional investors.

Recent figures from the European Fund and Asset Management Association show that in 2009 total assets in Ucits rose by 16.7 per cent, or EUR757bn, to reach a total of EUR5,299bn.

Gary Palmer (pictured), chief executive of IFIA, says: “While Ucits were traditionally limited to ‘long only’ type strategies, changes under Ucits III enabled the use of many common alternative investment strategies within a robust regulatory framework and investment managers are increasingly availing of these opportunities. Ucits III is a very good example of how the Ucits framework enables product innovation while insisting that strict regulatory standards are followed. The evolution of Ucits has continued with Ucits IV, which will increase efficiencies in the European asset management industry and further enhance the market for cross-border funds. The excellent attendance at this event shows the interest investment managers have in Ucits.”

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