All aboard

17 August 2010 By Neil Unmack Follow @unmack1

Firms are scrambling to launch funds that comply with UCITS, an EU standard for onshore investments. Managers see the vehicles as a way to tap new sources of cash, while investors like them because they are liquid and regulated. But there is still a risk some funds will blow up.

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Hedge fund managers launched about 160 funds under the Undertakings for Collective Investments in Transferable Securities (UCITS) framework this year, about 30 percent of total launches, compared with just 13 percent in 2008, according to Eurekahedge data last month.

UCITScompliant hedge funds now manage about $100 billion of assets, approximately seven percent of the global hedge fund industry, Eurekahedge estimates.

The European Union's UCITS are a set of minimum standards for investment funds, allowing them to be sold freely across European borders.

Hedge fund managers to launch or planning to launch UCITScompliant funds include U.S. firms Paulson & Co, Peter Schoenfeld Asset Management and Traxis Partners, the Financial Times reported on Aug. 5.

On Aug. 16, investors in MW Tops, a listed fund managed by Marshall Wace, voted to convert it into a UCITScompliant vehicle.

About 8 percent of global institutional investors currently hold UCITS funds, but 35 percent want to allocate to them in future, according to a Preqin survey in February. About 28 percent of managers run UCITS funds, and a further 28 percent are working on setting them up, the survey found.

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