UCITS III Funds: A Unique Offering
When it comes to investing in alternatives, there are three key fund characteristics that all investors evaluate: liquidity, transparency, and risk management. BHA analysts find that investors continue to prioritize their analysis of these criteria when choosing funds.
It’s not surprising, then, that during the past few months a significant number of European investors have expressed an interest in UCITS III funds. In fact, in conversations with BHA analysts, many investors have stated that they require hedge funds to be UCITS III compliant.
UCITS III funds are investment vehicles that apply absolute return strategies to a number of asset classes. The appeal of these vehicles stems largely from the fact that they are regulated by the European Commission and must abide by regulations put in place to protect investors’ capital. For example, UCITS III funds must offer daily and weekly liquidity. Additionally, they are required to provide transparency; UCITS III funds keep investors apprised of the asset classes in the funds and the exposure funds have to each strategy. Finally, UCITS III funds must follow a known set of risk-management guidelines.
BHA recently spoke with a large pension plan in Norway. It stated that one of its main concerns going forward is proper risk management. However, the pension plan also will require funds to have high levels of liquidity and transparency. It sees UCITS III funds as a good fit for its requirements.
UCITS III funds offer a regulated investment vehicle for institutional investors. As long as investors continue to seek out low-risk, high-return investments, UCITS III funds will have a place in the hedge fund industry.