The UCITS Nomenclature

UCITS TERMINOLOGY

For investors new to funds – and nearly everyone is new to active ETFs – it may be puzzling to see them described with the label “UCITS ETF.”  What this means is that they are structured under the European regulatory framework.  Undertakings for Collective Investment in Transferable Securities – UCITS – work under an EU-originated set of rules that govern investment funds to ensure they are diversified, liquid, transparent, and suitable for retail investors.  The UK still broadly recognises UCITS structures, and it makes sense for the majority of active ETFs listed in London because they are also listed elsewhere in Europe on bourses like Euronext Amsterdam or Borsa Italiana.  Funds maintain multiple listings on different stock exchanges so that they can gather more assets from investors all over Europe, while maintaining a standardised single corporate entity that is accepted in different countries.  Many of these UCITS structures are domiciled in Ireland, which has the relevant financial market expertise and administrative infrastructure as well as favourable tax treaties.  This is why these active ETFs can be traded in London without attracting any stamp duty – a small benefit that UK investors can enjoy every time they buy one of these funds.  A typical active ETF that we write about here may well have a US manager, an Irish UCITS fund structure, a listing in London and one elsewhere in mainland Europe, offering shares that may be traded in sterling and/or US dollars, and with investment mandates that span the globe.