Following a lengthy consultation, the European Securities and Markets Authority
(ESMA) published an opinion on 30 January 2017 concerning the use of share classes by E.U. Undertakings for Collective Investments in Transferable Securities
(UCITS) structures. Specifically, ESMA outlined four key principles that all UCITS funds must follow when setting up different share classes and considering whether certain existing share class hedging techniques comply with such principles. The opinion particularly impacts share classes that use a derivative to hedge against a particular risk. In a guest article, Monica Gogna, a partner in Ropes & Gray’s London office, reviews and explains the expected impact of the four principles articulated by ESMA and discusses whether hedging techniques may continue to be executed in a share class as opposed to setting up a separate sub-fund. Gogna provides practical guidance on next steps, including whether the manager may continue to offer the share class to new investors after the transition period expires, as well as whether managers will need to provide updated disclosures to investors. For additional insights from Gogna, see “Leading Law Firms Debate Effect of Hard vs. Soft Brexit on Hedge Fund Managers (Part One of Two)
” (Jul. 7, 2016). For commentary on other E.U. regulations from Ropes & Gray attorneys, see “A Fund Manager’s Guide to Calculating and Reporting Short Sales Under European Regulations
” (Jan. 5, 2017); and “Ropes & Gray Attorneys Discuss Implications for U.S. Hedge Fund Managers of the European Market Infrastructure Regulation
” (Jul. 18, 2014).