UCITS Q&A – Investment in Non UCITS Investment Funds
On 5 July 2018, the Central Bank published the twenty third edition of the Central Bank UCITS Q&A (link). Of note are Question ID’s 1002 & 1003;
Q. Must the non-UCITS investment fund include conforming provisions in its constitutional document in order to be eligible for investment by a UCITS or is it sufficient for the non-UCITS investment fund to operate in practice in a manner which complies with the requirements of Regulation 68(1)(e)?
A. The UCITS Regulations require that the constitutional document of the non-UCITS fund in which it is intended to invest includes a prohibition on investing more than 10% of its assets in other investment funds. A non-UCITS investment fund must also be subject to requirements in its jurisdiction of domicile which are equivalent to UCITS investor protections in order to comply with Regulation 68(1)(e). Alternatively, the nonUCITS fund must have requirements of the same effect in its constitutional document or offering document. A statement of the intended investment approach does not constitute a rule for this purpose.
Q. Guidance Note 2/03 on ‘UCITS – Acceptable investments in other collective investment undertakings’ lists categories of non-UCITS investment funds which are eligible for investment by UCITS. This list includes nonUCITS investment funds authorised in the US and which comply, in all material respects, with the provisions of the UCITS Notices. What category of US investment funds is being referred to?
A. Guidance Note 2/03 is referring to US investment funds which are subject to The Investment Company Act of 1940. It will be up to the UCITS to determine whether a specific US investment fund satisfies the requirements of Regulation 68(1)(e)
The CBI on issuing noted; “UCITS should be in compliance with this revised Q&A as soon as possible taking into account the best interests of the investors. In any event, compliance should be ensured no later than 5 October 2018.”