EU law provides that an entity which manages an EU based UCITS requires an authorisation to do so. Such an entity is known as a UCITS Management Company ("UCITS ManCo").
The authorisation that such a UCITS ManCo requires is one under Directive 2009/65/EC as amended (the "UCITS Directive") which has been implemented in Ireland by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 as amended (the "UCITS Regulations"). These are supplemented by regulations and related guidance issued by the Central Bank of Ireland (the "Central Bank").
Ireland is not only one of Europe's leading UCITS domiciles but is also home to many UCITS ManCos, MiFID firms, alternative investment fund managers ("AIFMs") and the new breed of dual AIFM/UCITS ManCo now referred to as the "Super ManCo".
In this short "How to" guide, we aim to give you an overview of what a UCITS ManCo can do, of who can be a UCITS ManCo and of the applicable Irish regulatory regime.
You are likely to be interested in this guide if you are:
- looking to set up or manage a UCITS in Europe; or
- looking to find a suitable EU jurisdiction from which to co-ordinate EU wide fund management activities; or
- considering your post-Brexit options, including for MiFID firms; or
- just looking to compare a stand-alone UCITS against third party UCITS or platform options.
1. What is a UCITS ManCo and what can it do?
In the following sections, we summarise what a UCITS ManCo is and what it can do.
Note that there are several different types of UCITS ManCos, each with different capacities. In some cases, they are set up to manage specific UCITS products. In other cases, they are designed to not only manage UCITS products but also to manage a range of non-fund client portfolios. Others may be set up to provide UCITS management solutions to those investment managers who do not wish to have their own UCITS ManCo, for cost or other reasons.
1.1 What is a UCITS ManCo?
In the fund management industry, particularly when dealing with collective investment schemes, the terms "Management Company" and "Investment Manager" have had different meanings, different functions and different passports. These distinctions can at times become blurred but it is important to understand which entities we are referring to when we use those terms, as explained further below.
When we refer to a "Management Company" (the term "Management Company" and "Manager" are used interchangeably and refer to the same entity), we are referring to the entity which has the ultimate responsibility for the overall management of a collective investment scheme. This overall management function encompasses overall control of the collective investment scheme, including the discretionary investment management function, the fund administration function and the distribution function and is referred to generally as "collective portfolio management".
If a UCITS ManCo is used for an Irish UCITS scheme, the contractual arrangements are structured so that the UCITS ManCo is mandated to carry out investment management, fund administration and distribution in respect of the Irish UCITS scheme but, in most cases, the UCITS ManCo delegates out fund administration to a regulated administrator and delegates the distribution activity to a global distributor and/or a number of distributors in the jurisdictions where the UCITS is being distributed. Some UCITS ManCos carry out significant asset management activities as well as distribution and we are seeing an increasing number of dual authorised UCITS ManCo / AIFM authorised Super ManCos. In many other cases, the UCITS ManCo delegates portfolio management activity to an appropriately regulated investment manager which, if it is a European entity, would most likely be authorised in its home EU Member State under the Markets in Financial Instruments Directive ("MiFID") or the Alternative Investment Fund Managers Directive ("AIFMD").
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.