EFAMA’s Kremer suggests ‘modified Ucits’ for less liquid assets

EFAMA head Claude Kremer has mooted the idea of a ‘modified Ucits’ to accommodate less liquid investments, which he said were a cornerstone of long-term investments and savings.

While Ucits mandates regular liquidity for investors, producing funds that typically offer daily, or weekly liquidity, Kremer (pictured) told delegates at Investment Europe’s Pan-European Fund Selector Summit in Lausanne today it was important Europe’s asset managers also educate clients about the return premia available if they were willing to invest for longer.

Asset classes like infrastructure, distressed debt, private equity and some hedge fund strategies typically do not fit into Ucits structures, partly because they do not give managers the level of market liquidity they must offer their investors at the fund level.

“When you invest in something like infrastructure, for example, daily liquidity is not necessary, so we probably need some form of adapted Ucits structure to accommodate those products and make sure there is not an expectation gap between clients and their managers,” Kremer said.

He was encouraged to see thinking on less liquid investments form part of the planned discussion for Ucits VI with consultation released in July – although, initially, he said he was dismayed the industry was having to consider the sixth iteration while it was “overwhelmed by Ucits IV while working on Ucits V.”

“There is potentially the need to promote long-term investments and the form of such investments.”

At a time when Europe’s governments seem increasingly bracing to pull away from supporting their citizens in retirement, Kremer also urged Europe’s asset management industry to educate retail investors about the importance of long term savings via fund products.

“Education is about caring for the long term health of the asset management industry, and also stopping investors selling low and buying high. Their wealth should be as important to investors as their health.”
To this end EFAMA is holding an investor education conference in November to discuss such issues.

Kremer said, at the most liquid end of the liquidity spectrum – money market and enhanced money market funds – management of liquidity risk, to ensure frequent redemptions could be met if necessary, was “part of the overall risk management process”.

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