Watchdog Rejects Hedge Fund Indices For UCITS

Stephen Harris

27 January 2006

The Committee of European Securities Regulators, a group of market watchdogs from the 25 European Union member states, have ignored industry requests and recommended that pan-EU UCITS funds should not be allowed to invest in hedge fund indices as they are seen as being too risky. The committee had been examining which new assets could be included in the cross-border funds and its advice will go to the European Commission for a final decision. The commission wants to give investors a wider choice of assets for inclusion in UCITS to make cross-border saving more attractive and help close the pensions funding gap. "Given the complexities of hedge fund indices and the fact that they are still developing, CESR cannot recommend, at this stage, allowing hedge funds indices to be considered as financial indices for the eligibility of UCITS," CESR said in a statement. Private placements, certificates of deposit along with indices based on financial derivatives on commodities and property were, however, endorsed by the committee for inclusion in UCITS.