The shift to alternative UCITS means more opportunities

By: Colin Keane

UCITS have dominated the European funds market for more than two decades, with assets under management equaling more than €8.3 trillion, representing 60% of the European market (according to EFAMA Sept, 2016). Highly regulated, transparent, and liquid are words synonymous with UCITS, but in an ever-changing market where investors seek absolute risk-adjusted returns, why are UCITS are moving away from traditional strategies towards alternatives, and what opportunities does this present?  

The UCITS market is immense. In fact, it is two-and-a-half times the size of the global hedge fund market (according to Barclay’s Hedge Fund index v EFAMA).

The 2014 introduction of the Alternatives in Financial Markets Directive (AIFMD) brought about a lot of uncertainty in the European alternative investment market. It was no surprise that 2015 was a stellar year for UCITS, with assets under management growing by almost €1 trillion, from €7.2 trillion to €8.16 trillion. The 2015 increase in assets was double that of year-on-year increases of previous years.

Institutional investors, such as pension funds and insurance companies, continue to drive the inflows, with many having constraints on investing into hedge funds. UCITS are distributed across Europe, Asia, the US and Latin America; they continue to be seen as the product of choice in Europe.

The growth of the ‘alternative UCITS’ sector has been well documented, with year-on-year growth of 29% in 2014 and 25% in 2015. In 2016, assets under management (AUM) in alternative UCITS were estimated to have reached €400bn, (according to LuxHedge) but in context of the overall UCITS AUM, this accounts for just 5% of the total market.

To further understand how alternatives have changed the UCITS market, who’s driving the change, and the opportunities it presents, read “What’s Driving the UCITS Phenomenon: Part 2”. If you would like to know more about SS&C’s alternative fund services, please contact