How things have changed in a year at the European Commission. From exploring the possibility of expanding the Ucits regime to take in hedge funds, open-ended real estate funds and private equity funds, the pendulum seems to have swung completely the other way.
These alternative investments are now to come under a separate regulatory framework which, according to the draft directive that has been doing the rounds, will forbid cross-border sales to retail investors, while enabling it for professional investors. It will be up to national regulators to decide whether such products are suitable for ordinary investors.
This is a step in the right direction. I always thought the idea of opening up the pan-European retail market to illiquid funds like real estate and private equity through Ucits was bonkers. Open-ended real estate funds on offer to the general public in the UK and Germany have run into well-documented problems. Unelss real solutions can be found, they should be mothballed. Closed end funds are a much more appropriate way of delivering access to illiquid assets.
Or have I got this completely wrong?
