Zeidler Group guides asset manager through UCITS eligibility

The manager had been weighing up exposure to notes issued by a Luxembourg SPV as a means of improving portfolio returns. Before proceeding, however, it needed to establish that doing so would not fall foul of the rules governing what UCITS funds are permitted to hold.

EU rules set out in both the UCITS Directive and the Eligible Assets Directive draw firm boundaries around permissible investments. Structured notes issued via SPVs frequently include embedded derivatives and bespoke features that demand detailed legal analysis, and eligibility cannot be standardised, as each instrument must be assessed individually against regulatory, operational, and strategic criteria.

Without specialist support, asset managers risk either excluding complex instruments altogether due to perceived regulatory burden.

Zeidler Group worked through the eligibility question systematically, examining the SPV architecture, the terms of the note issuance programme, and the derivative components embedded within the instruments. The assessment went beyond a narrow legal reading, factoring in the fund’s broader investment strategy, liquidity needs, and risk management obligations to ensure the conclusions were commercially useful as well as technically sound.

The manager came away with a clear view on eligibility, a stronger footing on compliance, and the ability to weigh the investment on its actual merits.

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