The European Securities and Markets Authority (ESMA) has called for greater transparency among providers of Ucits funds with multiple share classes, highlighting the need to align the objectives of the share classes.
In an opinion piece aimed at national regulators, ESMA said it had found “diverging approaches in different EU countries” and gave a six-month deadline for existing share classes that do not comply with the principles to close to new investors and 18 months to close to additional investment from existing investors.
“While all investors in a Ucits fund invest in a common pool of assets, share classes attribute different rights or features to sub-sets of investors although there is no legal segregation of assets between the share classes,” the report says.
The principles include: all share classes sharing the same investment objective; prohibiting hedged share classes aside from hedging currency risk; determining the features of a share class prior to its launch and disclosing the differences between the share classes to investors where there is a choice.
ESMA also stipulated Ucits firms should “implement appropriate procedures to minimise the risk that features specific to one share class could have a potentially adverse impact on other share classes of the same fund”.