Hedge Fund Managers Continue to Launch Ucits

July 18, 2011

Hedge fund managers continue to clone onshore versions of their funds to appeal to a wider investor base, reports Hedge Fund Week. There are now more than 400 Ucits and recent surveys indicate another 100 hedge fund managers are considering launching new Ucits funds.

As you may know, Ucits are funds that comply with the European Directive for retail open-ended investment funds. They are incorporated and authorized by the regulator in an EEA member state and can be distributed throughout the European Economic Area.

Managers choosing to launch a Ucit-compliant fund do so either on a banking platform or an independent platform. MLIS (Merrill Lynch Investment Solutions), is currently the industry leading platform, managing USD2.3billion in AUM.

“To take alternative strategies and put them in a regulated wrapper was an idea we felt would really take off and it has. By the end of 2011 our target is to be approaching USD 3-4 billion in AUM,” Miriam Muller, Head of MLIS, told Hedge Fund Week.

The quality of fund managers joining platforms such as MLIS illustrates the maturing nature of the Ucits movement. Firms such as Och-Ziff, AQR and Graham Capital are among the 13 firms that have joined MLIS. Four more managers are set to launch two sector funds (financial, sustainable resources), a merger arbitrage fund and a US equity fund.

“The sector will continue to evolve with product innovation increasing the number of hedge fund strategies that can be accommodated within a Ucits structure,” said Mark Mannion, head of relationship management EMEA, BNY Mellon Alternative Investment Services.

Three key factors appear to be driving success for new Ucits start-ups. First, fund managers need to have a solid track record in alternative investment management. Second, new funds need to have an ” an industrial-strength operating and distribution platform” that can handle the additional risk controls required by Ucits. And finally, branding is key. Managers need to offer a brand that retail and institutional investors will recognize. There aren’t many firms that combine all three.

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