Key Issues for Managers of Offshore Hedge Funds Launching Alternative UCITS
Mark Browne, Partner
Mason Hayes & Curran
Recognition of ‘UCITS’1as a global brand for funds continues to go from strength to strength. In the years following the introduction of the potential for such funds to take advantage of additional investment options more typically associated with the alternative industry and hedge funds (in particular further to the ‘UCITS III’ regulatory reforms2 and the Eligible Assets Directive3), steady growth in alternative UCITS, often referred to as ‘Newcits’, has been evident. In fact recent statistics indicate that the growth trend in the alternative sector of the UCITS market is accelerating and the number of such UCITS hedge funds now exceeds 1,000, with the majority having launched post the financial crisis of 2008. As a result alternative managers, many of whom traditionally only operated funds in the offshore sector4, are increasingly considering launching UCITS both in order to cater to increased investor demand for products with a higher level of liquidity and transparency and also to capitalise on the greater international distribution opportunities such funds afford. These opportunities include both a legal right to avail of pan European market access but also potentially expedited registration and facilitated distribution in third countries where the UCITS brand is readily identified and accepted. Recent statistics illustrate that in excess of 40% of all UCITS sales have come from such third countries, primarily those in the Far East.