Politics & Regulation

UCITS cannot invest in unregulated hedge funds, ESMA rules

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Fund managers will have to redeem hedge funds from their ‘trash buckets’, which allows UCITS-compliant funds to invest up to 10% of net assets in transferable securities and money market instruments.

Representatives at the European Securities & Market Authority (ESMA) want to ensure uniform application of Article 50(2)(a) of the UCITS Directive, and they have taken the decision to publish a formal opinion on its interpretation.

A number of national regulators, including the Central Bank of Ireland and the CSSF in Luxembourg, have interpreted Article 50(2)(a) as permitting UCITS to invest in unregulated investment funds, including hedge funds, provided the