UCITS (Undertakings for Collective Investments in Transferable Securities) funds may invest in securitisation, subject to a concentration limit of 10%. As part of a consultation on the UCITS Eligible Assets Directive (see TSI kompakt of 15 April 2025), ESMA discussed the pros and cons of adjusting the concentration limit with market participants.
Mixed feedback from the fund industry
The majority of consultation participants emphasised the importance of securitisation for the EU capital market. They highlighted their contribution to the growth of the real economy and see the revision of the European securitisation framework as an opportunity. Some proponents pointed to advantages such as higher returns, diversification in times of stress and positive performance in the past. Critics, however, warned of risks, including discrepancies between expected cash flows and the performance of the underlying exposures, as well as credit and counterparty risks.
Recommendations and measures
- Reduction of due diligence requirements: Some call for less complex and redundant requirements for institutional investors, as these are considered too burdensome.
- Adjustment of transparency requirements: Proposals include improving disclosure rules.
- Additional regulations: Another response was to allow only STS-securitisations for UCITS funds as well as listing requirements for such debt instruments.
Outlook
ESMA takes note of the different positions and recommends discussing further changes in future revisions of the UCITS Directive. A consultation is planned for 15 October 2025. The aim is to create balanced regulation that both promotes growth and limits risks. The results of these discussions will certainly also influence the current legislative proposals to strengthen the securitisation markets in Europe (see TSI kompakt of 17 June 2025).
ESMA final report on the review of the UCITS Eligible Assets Directive