ESMA sets out UCITS eligible assets framework
27 June 2025 Europe
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The European Securities and Markets Authority (ESMA) has published technical advice to the European Commission on reviewing the Undertakings for Collective Investment in Transferable Securities (UCITS) Eligible Assets Directive (EAD), proposing a look-through approach for determining asset eligibility.
ESMA's advice follows a comprehensive assessment of how the directive has been implemented across member states. The regulator aims to ensure regulatory clarity and uniformity across jurisdictions for assets that UCITS can hold.
Under the proposals, a look-through approach would serve as the fundamental criterion for determining eligibility of asset classes for at least 90 per cent of UCITS portfolios. The remaining 10 per cent could include indirect exposures to alternative assets, subject to regulatory safeguards on liquidity and valuation, allowing improved risk diversification and returns from uncorrelated asset classes.
“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,” said Verena Ross, ESMA chair.
The technical advice also addresses the European Union's ambitions to create a Savings and Investment Union. ESMA has outlined considerations for improving retail investor access to EU Alternative Investment Funds through harmonising divergent national rules on cross-border marketing and potentially creating a retail AIF product.
The proposals include clarifications of key concepts and definitions in both the UCITS EAD and the broader UCITS Directive concerning eligibility criteria for asset classes. ESMA has also considered alignment with other EU legislation.
ESMA expects the European Commission to incorporate the technical advice as it reviews the UCITS EAD. The directive provides guidance on assets that UCITS can invest in under EU regulations.
The move comes as EU regulators seek greater harmonisation of investment fund rules across the bloc while maintaining investor protection standards.
ESMA's advice follows a comprehensive assessment of how the directive has been implemented across member states. The regulator aims to ensure regulatory clarity and uniformity across jurisdictions for assets that UCITS can hold.
Under the proposals, a look-through approach would serve as the fundamental criterion for determining eligibility of asset classes for at least 90 per cent of UCITS portfolios. The remaining 10 per cent could include indirect exposures to alternative assets, subject to regulatory safeguards on liquidity and valuation, allowing improved risk diversification and returns from uncorrelated asset classes.
“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,” said Verena Ross, ESMA chair.
The technical advice also addresses the European Union's ambitions to create a Savings and Investment Union. ESMA has outlined considerations for improving retail investor access to EU Alternative Investment Funds through harmonising divergent national rules on cross-border marketing and potentially creating a retail AIF product.
The proposals include clarifications of key concepts and definitions in both the UCITS EAD and the broader UCITS Directive concerning eligibility criteria for asset classes. ESMA has also considered alignment with other EU legislation.
ESMA expects the European Commission to incorporate the technical advice as it reviews the UCITS EAD. The directive provides guidance on assets that UCITS can invest in under EU regulations.
The move comes as EU regulators seek greater harmonisation of investment fund rules across the bloc while maintaining investor protection standards.
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