The term “Newcits”, an umbrella term coined by the media to describe funds compliant with Ucits III but criticised for straying into loose definitions covering increasingly complex structures, should not be used by European investment managers, an industry body has warned.
The term “Newcits”, an umbrella term coined by the media to describe funds compliant with Ucits III but criticised for straying into loose definitions covering increasingly complex structures, should not be used by European investment managers, an industry body has warned.
The term “Newcits” is not helpful and should not be used, said the European Fund and Asset Management Association (EFAMA).
In its latest report, drawn up as a defence of the Ucits structure, the body attempts to address the problems that have arisen out of an evolving definition of what Ucits is.
Ucits now incorporates a range of investment strategies and instruments, including the use of derivatives within a portfolio, it said.
Demand from investors for absolute return strategies operating within a more regulated framework has driven that movement, the report said. By using derivatives, managers can build up an investment strategy like that used for traditional alternatives, or beyond the function of a long-only approach, it added.
But the report said no new brand or sub-category of Ucits had emerged, that more recently created fund structures were still subject to the same regulatory requirements, and suggested the Newcits label was damaging to the overall brand.
“Newcits are neither new products nor a new category of funds,” it said.
“The “Newcits” label was coined by the media and should not be adopted by others.
“We do not believe that it is necessary or beneficial to have a specific label for these funds. Labelling in such a way a universe of diverse strategies will only distract investors, regulators and other stakeholders from the real issues,” said EFAMA’s director general Peter De Proft.
In the report, EFAMA said it had full confidence in European super-regulator the European Securities and Markets Authority (ESMA) to enforce Ucits requirements while ensuring a level-playing field for managers and increasing investor protection.
