Investment funds are not obliged to comply with the EU regulation. Funds that are only aimed at a handful of institutional investors are automatically excluded from its scope, as well as those who invest in a very limited number of securities of a very specific sector such as biotechnology for example.
Investment funds intended to be offered to a large number of investors, however, definitively have an incentive to comply with the EU rules. Indeed, in doing so, they receive a “European passport” that allows them to sell their shares throughout the European Union once they have received approval by the supervisory authority of their EU member country of origin. The fact that the fund no longer needs to obtain a license in each single country greatly reduces both the formalities, costs and time required to access foreign markets.
In addition, the fact that UCITS funds are strictly regulated and monitored and therefore provide a high level of investor protection is a powerful marketing argument. Thanks to this investor protection, the term “UCITS” has become a quality label recognized and appreciated both by regulators and by the investment community far beyond the borders of the EU.
