There are specific rules on what Ucits can invest in and how much they can borrow, but the main point is that it must invest in transferable securities. In other words, all investments should be liquid.
Nurs are non-Ucits retail schemes and by definition do not comply with all the Ucits rules. They are FCA-authorised and they can be marketed to UK retail investors, but they cannot be ‘passported’ throughout Europe.
Nurs can invest in a wider range of eligible investments than Ucits and therefore, arguably, they may be a better structure to use when manufacturing multi-asset funds.
Here’s a quick overview of the main differences between the two:
| Ucits | Nurs | |
| Permitted Investments | • Cash • Deposit and deposit receipts • Fixed interest • Equities • Debentures • Investment trusts • Warrants • Units in other funds • Derivatives • Money market instruments • Forward contracts | Everything Ucits can plus the following: • Direct property • Gold (max 10%) • Unregulated schemes • Unregulated funds (max 20%) |
| Limits | 5/10/40 rule (see below) | None |
The 5/10/40 rule
A Ucits fund may invest no more than 5 per cent of its value in approved securities or money market instruments issued by any one entity. This limit can be increased to a maximum of 10 per cent in a single entity provided that the total value of any holdings between 5 per cent and 10 per cent does not exceed 40 per cent of the fund.
As an example, at a minimum, that’s:
• 4 investments @ 10 per cent weighting = 40 per cent; plus
• 12 investment @ 5 per cent weighting = 60 per cent.
What this means is that from a concentration perspective, a Ucits must have a minimum amount of diversified assets, which does not apply to a Nurs. In practice, most fund managers hold many more investments.
Authorised versus unauthorised
The first distinction is whether to go for an authorised or unauthorised fund. Most choose authorised because of the protection of strict rules of governance surrounding the running of the funds. Also the FCA has the power to require an authorised manager to provide compensation to a fund – this is on top of the Financial Ombudsman Service and the Financial Services Compensation Scheme.
So it may be that the most useful distinction for authorised funds is whether or possibly when to use Ucits or Nurs funds.
It may well be that some advisers rely on factsheets for information. This can be a useful summary of what a fund is and might form a basis for narrowing down a group of funds for further research. Keep in mind though that there are not regulated documents and advisers cannot rely on the information provided in factsheets alone (look at what happened with Arch Cru).
