UCITS VI: Undertakings for Collective Investment in Transferable Securities

Entry into force

16 April 2026

What is the UCITS VI Directive?

Among the key elements, the UCITS VI Directive modernises the framework for liquidity management tools, introduces a new reporting obligation for UCITS and introduces enhanced rules for delegation by portfolio managers to third parties. It confirms that a central securities depository (CSD) is considered to be a delegate of the depositary bank when acting as depositary, and it does not alter the requirement that the depositary must be located in the country in which the fund is domiciled, even though it grants exemptions to certain States.

The Directive has been published in the EU's Official Journal on 26 March 2024 and entered into force twenty days after. Member States had 24 months to transpose it.

Although this is an evolution rather than a revolution, there are three notable changes in UCITS VI:

• Modernizing the framework for liquidity management tools
• Additional UCITS reporting
• Strengthening the governance of Asset Managers, in particular with regard to the delegation of managers to third parties.

1. Two mandatory liquidity management tools for UCITs

Liquidity management practices have highlighted that some AIFs use tools that are not suited to the liquidity risk profile or investment strategy, or that, more simply, the fund's incorporation documents do not always provide for the use of such mechanisms. As a result, market practices have been disparate across jurisdictions, resulting in unequal results and differentiated treatment of investors.
In order to rectify these disparities, AIFMD* II/UCITS VI introduces a European framework aimed at enabling AIFMs to manage liquidity and market stress issues in a coherent system that guarantees investor protection. The new directive harmonises liquidity risk management and requires each fund to integrate and implement detailed liquidity management tools (LMTs).

AIFMD II/UCITS VI sets out a list of LMTs:

1. Suspension of subscriptions, repurchases and redemptions
2. Redemption gate
3. Extension of notice periods
4. Redemption fee
5. Swing pricing
6. Dual pricing
7. Anti-dilution levy (ADL)
8. Redemption in kind
9. Side pockets

These tools are classified into two categories: quantitative management tools that affect quantities, and qualitative tools that affect prices. However, Funds Manager is free to choose at least two liquidity management mechanisms in the fund's constituent documents, with the exception of money market funds for which a single tool is required. Il should be noted that dual pricing is not available on French market pace. As suspension of subscriptions/redemptions and side pockets form are part of common law (Directive 2011-19), the two additional tools must be selected from the list of the following six tools: redemption fee, swing pricing, anti-dilution levy, redemption gate, redemption in kind or extension of notice period.

The manager's choice of tools must be consistent with the fund's investment strategy, liquidity profile and redemption policy. This involves formalising in detail the policies and procedures for activating and deactivating LMTs, with the usual administrative and operational provisions.

AIFMD II/UCITS VI requires Funds Managers to notify their competent authorities of the activation and deactivation of such LMTs. AIFMD II/UCITS VI thus strengthens the supervisory powers of national authorities.

Managers must communicate to investors the conditions for activating LMTs. Enhanced information is also essential to ensure that LMTs can function properly.

2. New UCITS supervisory reporting

The Directive AIFMD II amends the UCITS Directive (2009/65/EC) and introduce a new supervisory reporting obligation for UCITS management companies for the first time. It extends to UCITS the reporting logic AIFMD has applied to alternative funds.

The new obligation will apply from 16 April 2027, once the regulatory and implementing technical standards (RTS/ITS) specifying its format will be published by European Securities and Markets Authority (ESMA). 

3. Governance and minimum substance of managers

The new directive strengthens the governance structure for managers, aligning with industry practices and post-Brexit regulatory changes. It reinforces "minimum substance" obligations applicable to assets managers.

The new rules specify that the management company's business must be carried on by at least two natural persons, either full-time employees or executive members or members of the management company's management body domiciled in the European Union.

Regarding delegation agreements, AIFMD II/UCITS VI strengthens the current regulatory framework. The Funds managers must be able to justify its entire delegation structure to the competent authorities before the provisions of the delegation take effect, and all appropriate human and technical resources used to monitor the delegate must therefore be described in detail. The management company must be able to give additional instructions to its delegates at any time and to withdraw the mandate with immediate effect where the interests of investors and clients so require. This requires careful oversight and control to ensure effective governance and compliance.

* AIFM: Alternative Investment Fund Managers