MAKING THE MOST OF UCITS IV

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Implementation considerations & points of attention

re-domiciliation of your existing structure. On the other hand, you will have to assess the potential of new investors in your target structure. Tax risks should also be examined at investor and portfolio level. You will have to select the domiciliation of your future structure ac- cording to various criteria. Key questions you should ask yourselves are: Is the jurisdiction where you have based your headquarters sui- table for cross-border distribution? Is it preferable to domicile your UCITS structure in a cross-border distribution centre? Which one? What is the optimal structure to set up, taking into account marke- ting aspects, but also regulatory, legal and tax aspects? Besides, if you chose to replace your existing non-UCITS range by your new UCITS structure (conversion, liquidation or re-domicilia- tion), you will have investor notification duties. INVESTMENT POLICY One key issue will be to define the appropriate UCITS investment policy that respects both the law of the EU domiciliation country and the original spirit of your reference alternative strategy. If you decide to convert or duplicate your old structure to UCITS, then you will have to confirm the eligibility of the existing investment policy to the UCITS rules. This preliminary task is complex and must be managed with a high level of accuracy. Besides, as you enter a more costly regulated environment, it may reduce returns as compared to the same strategy delivered in a non- UCITS fund. A cost/benefit analysis could be carried out. AUTHORISATION PROCEDURES You should keep in mind that UCITS are regulated structures requi- ring a full authorisation procedure before being launched, as the regulator of the country of fund domiciliation want to legitimately know “what is behind”.

The domain of excellence where you have been developing your ex- pertise so far is obviously different from the new environment you have decided to enter. You will notably have to thoroughly unders- tand the UCITS regulatory (eligible assets, investment restrictions, risk management constraints, etc.), tax and operational environment (flexibilities and constraints). When taking glance at the UCITS world, you face the following is- sues: • Lack of distribution capabilities in Europe and in the other poten- tial UCITS markets; • Lack of knowledge in structuring a hedge fund strategy under UCITS; • Lack of internal resources to tackle the UCITS complexities when it comes to setting up your own product (e.g. selection of ser- vice providers and of the right governance model, coordination of lawyers and service providers in the set up phase, etc.). Additionally, if you are a fund of hedge fund manager, you face the challenge of having only a limited number of newcits at your dis- posal, thus reducing your potential to add value and differentiate yourselves. In case of conversion or re-domiciliation of your existing funds, you will have to ensure a transition as smooth as possible between your current and target structures. INVESTOR-RELATED ASPECTS On one hand, you will have to evaluate the risk to see your current investors move to another structure at the time of conversion or Product re-structuring challenges

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CACEIS - UCITS IV |  page 29