ESMA provides advice on eligible assets for UCITS
The European Securities and Markets Authority (ESMA), the EU’s financial markets’ regulator and supervisor, has published its advice to the European Commission (EC) on the review of the UCITS Eligible Assets Directive (EAD). The EAD is an implementing directive providing clarification on the assets a UCITS can invest in. In the Technical Advice ESMA provides a comprehensive assessment of the EAD’s implementation across Members States and makes proposals to ensure regulatory clarity and uniformity across jurisdictions.
A central element of the Technical Advice is the application of a look-through approach as a fundamental criterion for determining the eligibility of asset classes for at least 90% of the UCITS portfolio. Allowing a certain degree of flexibility, the advice proposes to permit indirect exposures to alternative assets up to 10% (subject to regulatory safeguards e.g. on liquidity and valuation) with a view to improving risk diversification and generating returns from uncorrelated asset classes.
Verena Ross, Chair, said:
“The policy proposals set out by ESMA are based on a comprehensive data collection exercise, and will help foster regulatory harmonisation and supervisory convergence for UCITS management companies operating and marketing UCITS on a cross-border basis.”
Also, in the spirit of the EU’s ambitions to create a Savings and Investment Union, ESMA sets out high level considerations for improving retail investor access to EU AIFs, through harmonising currently divergent national rules on cross-border marketing and the potential creation of a retail AIF product.
The Technical Advice proposes clarifications of various key concepts and definitions included in the UCITS EAD and the UCITS Directive concerning the criteria for the UCITS eligibility of asset classes. Finally, it also includes considerations and proposals on the alignment with other EU pieces of legislation.
Next steps:
ESMA expects the European Commission to take this Technical Advice into account as it reviews the UCITS EAD.
Further information:
Solveig Kleiveland
Team Leader - Communications
press@esma.europa.eu