ESMA Issues Opinion On UCITS’ Investments Within 10% Ratio

The European Securities and Markets Authority ("ESMA") has issued an opinion dated 20 November 2012 (the "Opinion") in the context of UCITS' ability to invest up to 10% of net assets in transferable securities and money market instruments other than those traded on a regulated market, as referred to in Article 50(1) of the UCITS directive.

ESMA has issued the Opinion on the basis that questions had emerged about the correct interpretation of the 10% derogation, and whether it includes investment in collective investment undertakings.

In order to ensure uniform application of this provision across member states, ESMA states that the derogation allowing for the "10% ratio" refers only to investments in transferable securities and money market instruments, and that there is no derogation with respect to investment in collective investment undertakings. ESMA has opined that a UCITS may only invest in other UCITS or funds that are subject to equivalent supervision as