Abstract
The European Union’s (EU) directive for Undertakings for Collective Investment in Transferable Securities (UCITS) is a regulatory frame-work that permits the replication of certain hedge fund-like investment strategies. In this chapter we present a summary of the main aspects of the framework, offer an analysis of their advantages and disadvantages, and examine whether the regulations impose significant restrictions on the investment opportunities of alternative UCITS funds, that is, those UCITS funds that actually employ hedge fund-like investment strategies. Additionally, we discuss swap arrangements, which allow alternative UCITS funds to replicate hedge fund strategies which are not feasible in the current regulatory environment. In those cases we examine the new risks that appear as a result of these replication strategies.
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