FR - Amendment of legal framework for funds placed in run-off management


Decree No. 2020-286 implementing the PACTE Law amends provisions on segregated funds for the run-off management of assets in a collective investment that are no longer recoverable.

As such, the former framework proved to be inconsistent with the UCITS Directive (where the original fund was a UCITS) considering the fact that a UCITS fund cannot be transformed into a non-UCITS fund (whereas the side pocket opened to retrieve non-recoverable assets was a specialised professional fund).

The PACTE Law is seeking to reverse the structure of segregated funds to ensure that the new UCI is indeed of the same kind as the former UCI. Once the UCITS is split, it shall continue to hold illiquid assets and become the de facto side pocket. Healthy assets shall then be transferred to a new UCITS created for this purpose. Once the transfer is complete, the former UCITS goes into liquidation and is no longer bound by the investment requirements of the UCITS Directive, while maintaining the same status under the passport regulations.

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