The European Commission has published a research paper entitled Investment funds in the European Union: Comparative analysis of the use of investment powers, investment outcomes and related risk features in both UCITS and non-harmonised markets.

The research paper sets out the results of a survey into the investment outcomes (performance and related risks) of UCITS and non UCITS funds over the past five years. The survey also looked at how UCITS managers have used the new investment possibilities that the UCITS III Directive introduced.

The research paper reports that the survey found that a large number of UCITS funds have started to invest in derivatives although the intensive use of derivatives is confined to a small subset of UCITS funds. The research paper also examines the risks associated with the use of enlarged investment powers such as leverage risk, valuation risk, liquidity risk and counterparty risk. The research paper reports that fund managers have developed strong risk management procedures before launching new, more complex products.

The research paper will help the European Commission prepare a communication on non-harmonised investment funds which is expected to be published in the Autumn of 2008. The research paper will also be discussed on 8 April 2008 at an open hearing on non-harmonised retail funds and real estate funds.

View Investment funds in the European Union: Comparative analysis of the use of investment powers, investment outcomes and related risk features in both UCITS and non-harmonised markets, 12 February 2008