In virtually all major global financial markets retail and
institutional investors alike are able to buy UCITS funds
– except US investors.
US-based retail investors are unable to buy the global
phenomenon and the greatest European financial services export
– UCITS – because their financial regulators
do not permit the sale of these funds.
US-based institutional investors can use UCITS vehicles
– but only through a cumbersome private placement
Investors in Europe as well as Asia and Latin America have all
embraced the regulatory wrapper because of the benefits it
brings to investors – including increased liquidity,
transparency and an extra layer of regulation (though investors
into UCITS should of course also do their own due-diligence
before investing in any fund.)
It feels like US-based investors are missing out on the
democratisation of the hedge fund industry.
It is great in my view that many strategies, previously only
available to high-net-worth individuals and institutional
investors because of unfavourable tax treatment and high
minimum amounts, are now available to the masses.
But US-based investors are excluded from the democratisation of
the hedge fund industry via the UCITS wrapper – and
thus are not benefiting from the convergence between the
traditional asset management industry and the alternative
industry which has created lots of opportunities.
At a time where national boundaries become less significant,
the world gets smaller and increasingly connected, US-based
investors should I think be able to get access to the
strategies using the wrapper.
But there is a caveat. European regulators, who drew up
the UCITS directives, have also created the Alternative
Investment Fund Managers Directive.
This means by 2017 the national private placement regimes
within Europe will be terminated and a passport required by all
hedge funds being marketed into the EU.
This still leaves a long way from the greater degree of harmony
required between the regulatory schemes in the US and the
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