Regulation heads in right direction

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?

About the blog

FTfm is no longer updated but it remains open as an archive.

FTfm's specialist writing team offer their insights into the global fund management industry.

About the authors

Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.

Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.

Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.

Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.