Executive Summary
In June 2023, the European Securities and Markets Authority (“ESMA”) received a formal request (the “mandate”) from the European Commission (“EC”) to provide technical advice on the review of Directive 2007/16/EC on UCITS eligible assets (the “UCITS EAD”).
The UCITS EAD, first published in 2007, aimed to help National Competent Authorities (“NCAs”) and market participants to develop a common understanding of the eligibility of assets under the UCITS Directive and to ensure a consistent application of various key definitions and concepts set out in the UCITS Directive. Over the years, ESMA has provided guidance to market participants and NCAs on a variety of UCITS investment-related matters, notably by publishing many ESMA Q&As, an ESMA opinion on certain investment limits set out in the UCITS Directive and the ESMA guidelines on ETFs and other UCITS issues.
Given that the UCITS EAD dates back to 2007, the EC considers it important to ensure that the eligibility requirements are implemented in a uniform manner in all Member States, while also taking into account market and regulatory developments that have occurred over the past decades.
The mandate covered a broad range of policy issues, asking ESMA to provide suggested amendments to the UCITS EAD and, if appropriate, also the Directive 2009/65/EC on Undertakings for Collective Investment in Transferable Securities (“UCITS Directive”) in the medium to long-term.
The mandate invited ESMA to conduct a data gathering exercise collecting insights on the manner and extent to which UCITS have gained direct and indirect exposures to certain asset classes that may give rise to divergent interpretations and/or risk for investors (e.g., structured/leveraged loans, catastrophe bonds, emission allowances, commodities, crypto-assets, unlisted equities). As a result, ESMA carried out a comprehensive survey and data collection exercise with NCAs to gather further insights (the “NCA survey”).
In May 2024, ESMA launched a Call for Evidence on the review of the UCITS EAD, seeking input and data from industry stakeholders on a broad range of policy issues. The consultation period closed in August 2024 and ESMA received over 60 responses – including from AIMA.
ESMA’s technical advice, published on 26 June 2025, provides policy proposals to the EC on a variety of issues. In terms of next steps, the EC is now expected to take this technical advice into account as it reviews the UCITS EAD. In the meantime, managers of UCITS may want to consider ESMA’s proposals against their current portfolios to assess what, if any, changes could be required in the future, but no action is required to be taken at this time.
Please contact James Delaney with any questions regarding these requirements.
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![James Delaney [273x154].jpg](https://www.aima.org/static/625e9fb9-44f6-4298-9e3d67433e4a908b/forewordteammember_80b0dbf3d3f0c9d3e58a379104f7efa7/James-Delaney-273x154.jpg)
James Delaney
Managing Director, Asset Management Regulation
Practical Implications
ESMA's technical advice on UCITS eligible assets, includes:
- Look-Through Approach: ESMA advises a mandatory look-through for at least 90% of a UCITS portfolio to verify that all underlying assets are eligible, as defined in Article 50(1) of the UCITS Directive.
- Indirect Exposures: UCITS can have limited indirect exposure (up to 10%) to non-eligible assets, including alternative assets, provided strict liquidity, valuation, and risk management safeguards are in place.
- Liquidity: ESMA sees room for improvement in the UCITS EAD provisions regarding the presumption of liquidity and negotiability for listed instruments. ESMA recommends clarifying in the UCITS EAD that while listing is a key factor, it must not lead to an automatic assumption of current or future liquidity and negotiability.
- Retail access to alternative assets: ESMA proposes the EC consider creating a new EU harmonised AIF product (complementing EuVECA, EuSEF, and ELTIF) tailored for semi-liquid strategies, including: private market.
assets or (re)insurance-type of asset classes - Clarification on Transferable Securities: ESMA seeks to clarify the definition of "transferable securities" and remove any presumptions of liquidity, aligning requirements with MiFID II.
- Financial Indices: Financial indices must be diversified and subject to the look-through approach.
- AIF Investments: A clear distinction should be made between open-ended and closed-ended alternative investment funds (AIFs).
- Ancillary Liquid Assets: A 20% counterparty limit should be applied.
- EPM Techniques: Enhanced clarity is needed on costs and closer alignment with the Securities Financing Transactions Regulation (SFTR).
- Review of Existing Rules: ESMA is recommending a review of the UCITS framework to address inconsistencies in implementation across Member States.
While the European Commission will consider ESMA's advice, UCITS managers are not required to take immediate action and should monitor developments.
Timeline
AIMA has categorized this proposal as Medium Priority/Medium Impact and it is therefore represented in mid-dark blue in the AIMA Regulatory Forecast gantt chart.
| ESMA technical advice on the review of the UCITS EAD | June 26, 2025 | |
| AIMA submits response to ESMA's Call for Evidence on the review of the UCITS EAD | August 7, 2024 | |
| ESMA Call for Evidence on the review of the UCITS EAD | May 7, 2024 | |
| Formal request to ESMA for technical advice on the review of Commission Directive 2007/16/EC on UCITS eligible assets (the "UCITS EAD") | June 6, 2023 | |
| Commission Directive 2007/16/EC on UCITS eligible assets | March 23, 2007 |