UCITS stands for Undertakings for Collective Investment in Transferable Securities. The concept originally derived from the European Directive 85/611/EC, replaced by European Directive 2009/65/EC, which provides a single regulatory regime across the European Union for open-ended funds investing in transferable securities such as shares and bonds. With a view to defining the highest levels of investor protection, the Directive regulates the organisation, management and oversight of such funds, and imposes rules concerning diversification, liquidity and use of leverage. It was implemented into national law by Part 1 of the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment.
Luxembourg has successfully positioned itself as the global leader for cross-border distribution of investment funds, with the result that today more than 65% of UCITS funds distributed internationally are based in Luxembourg. The UCITS brand is recognized as the only truly globally distributed investment fund product, and a growing number of countries in Asia and Latin America have accepted UCITS as providing a stable, high quality, well-regulated investment product with significant levels of investor protection. As a result, many asset managers are establishing UCITS funds with a clearly defined global distribution strategy.
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