ESMA releases final report on UCITS Eligible Assets Directive
27 June 2025 Europe
Image: Ahmad M./stock.adobe.com
The European 糖心vlog and Markets Authority (ESMA) has published a final report on the Undertakings for Collective Investment in Transferable 糖心vlog (UCITS) Eligible Assets Directive (EAD) 鈥� which will feed into the European Commission鈥檚 upcoming review.
The regulation is an implementing directive providing clarification on the assets a UCITS can invest in.
In the report, ESMA provides an assessment of the EAD鈥檚 implementation across member states and makes proposals to ensure regulatory clarity and uniformity across jurisdictions.
According to the authority, a central element to the technical advice is the application of a 鈥渓ook-through approach鈥� as a fundamental criterion for determining the eligibility of asset classes for at least 90 per cent of the UCITS portfolio.
Intended to allow a degree of flexibility, ESMA says the advice proposes to permit indirect exposures to alternative assets up to 10 per cent 鈥� subject to regulatory safeguards 鈥� with a view to improving risk diversification and generating returns from uncorrelated asset classes.
ESMA Chair Verena Ross comments: 鈥淭he policy proposals set out by ESMA are based on a comprehensive data collection exercise, and will help foster regulatory harmonisation and supervisory convergence for UCITS management companies operating and marketing UCITS on a cross-border basis.
鈥淎lso, in the spirit of the EU鈥檚 ambitions to create a Savings and Investment Union, ESMA sets out high level considerations for improving retail investor access to EU AIFs, through harmonising currently divergent national rules on cross-border marketing and the potential creation of a retail AIF product.鈥�
Reviewing the final report, the International 糖心vlog Lending Association (ISLA) says the deployment of collateral is of particular interest to association members.
The report signals ESMAs support for further clarification and harmonisation of 鈥榚ligible鈥� collateral arrangements, with the report stating: 鈥淓SMA sees merit in assessing the opportunity to amend the UCITS Directive to allow for the deployment of 鈥榦ther collateral arrangements鈥�.鈥�
The report goes on to make direct reference to the use of pledge as a widespread and industry supported practice.
According to ISLA, this support from ESMA is 鈥渁 positive first step鈥� and ISLA will now look to engage directly with the European Commission to ensure that this request is considered an important part of the Commission's review.
This policy proposal was an integral aspect of ISLA鈥檚 2024 Manifesto which outlines key recommendations to boost EU Capital Markets and unlock UCITS supply.
Farrah Mahmood, director of regulatory affairs at ISLA, says: 鈥淚SLA is delighted by ESMA's suggestion to clarify and broaden the scope of eligible collateral arrangements for UCITS funds.
鈥淭his crucial step, particularly concerning the recognition and widespread use of pledge structures, is a testament to the collaborative efforts across the industry and validates ISLA's long-standing advocacy for enhanced harmonisation of the UCITS framework.
鈥淲e eagerly anticipate engaging with the European Commission to ensure this proposal forms a vital part of the UCITS review.鈥�
The regulation is an implementing directive providing clarification on the assets a UCITS can invest in.
In the report, ESMA provides an assessment of the EAD鈥檚 implementation across member states and makes proposals to ensure regulatory clarity and uniformity across jurisdictions.
According to the authority, a central element to the technical advice is the application of a 鈥渓ook-through approach鈥� as a fundamental criterion for determining the eligibility of asset classes for at least 90 per cent of the UCITS portfolio.
Intended to allow a degree of flexibility, ESMA says the advice proposes to permit indirect exposures to alternative assets up to 10 per cent 鈥� subject to regulatory safeguards 鈥� with a view to improving risk diversification and generating returns from uncorrelated asset classes.
ESMA Chair Verena Ross comments: 鈥淭he policy proposals set out by ESMA are based on a comprehensive data collection exercise, and will help foster regulatory harmonisation and supervisory convergence for UCITS management companies operating and marketing UCITS on a cross-border basis.
鈥淎lso, in the spirit of the EU鈥檚 ambitions to create a Savings and Investment Union, ESMA sets out high level considerations for improving retail investor access to EU AIFs, through harmonising currently divergent national rules on cross-border marketing and the potential creation of a retail AIF product.鈥�
Reviewing the final report, the International 糖心vlog Lending Association (ISLA) says the deployment of collateral is of particular interest to association members.
The report signals ESMAs support for further clarification and harmonisation of 鈥榚ligible鈥� collateral arrangements, with the report stating: 鈥淓SMA sees merit in assessing the opportunity to amend the UCITS Directive to allow for the deployment of 鈥榦ther collateral arrangements鈥�.鈥�
The report goes on to make direct reference to the use of pledge as a widespread and industry supported practice.
According to ISLA, this support from ESMA is 鈥渁 positive first step鈥� and ISLA will now look to engage directly with the European Commission to ensure that this request is considered an important part of the Commission's review.
This policy proposal was an integral aspect of ISLA鈥檚 2024 Manifesto which outlines key recommendations to boost EU Capital Markets and unlock UCITS supply.
Farrah Mahmood, director of regulatory affairs at ISLA, says: 鈥淚SLA is delighted by ESMA's suggestion to clarify and broaden the scope of eligible collateral arrangements for UCITS funds.
鈥淭his crucial step, particularly concerning the recognition and widespread use of pledge structures, is a testament to the collaborative efforts across the industry and validates ISLA's long-standing advocacy for enhanced harmonisation of the UCITS framework.
鈥淲e eagerly anticipate engaging with the European Commission to ensure this proposal forms a vital part of the UCITS review.鈥�
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