On 30 November 2023, the CSSF released its latest update of the FAQ regarding the Law of 17 December 2010 on undertakings for collective investment (the “2010 Law), originally published on 8 December 2015. This 16th version aims to clarify key aspects of UCITS from a Luxembourg perspective, addressing management companies and UCITS established in Luxembourg.

The updated FAQ delves into the “ancillary liquid assets” concept, assets that UCITS are permitted to hold under Article 41(2)b) of the 2010 Law. Notably, it includes updates to Questions 1.14 and 1.15.

The FAQ outlines that ancillary liquid assets for UCITS should be limited to bank deposits at sight, such as cash held in current accounts that are accessible at any time. These assets are meant to cover current or exceptional payments, or for the time necessary to reinvest in eligible assets under Article 41(1) of the 2010 Law, or for a period strictly necessary during unfavorable market conditions.

The FAQ reiterates the 20% limit of a UCITS net assets for holding ancillary liquid assets. However, this limit may be temporarily breached for a strictly necessary period when, due to exceptionally unfavorable market conditions, circumstances require it, and where such breach is justified in the interests of investors (e.g., in extremely serious circumstances such as the September 11 attacks or the collapse of Lehman Brothers in 2008).

Furthermore, regarding feeder UCITS as per Article 77(2)(a) of the 2010 Law, it is specified that ancillary liquid assets can include highly liquid assets such as deposits at credit institutions, money market instruments, and money market funds. In this context, feeder UCITS are allowed to allocate 15% of their total assets to such ancillary liquid assets.

Finally, the FAQs clarify that bank deposits, money market instruments, and money market funds, unless they meet the criteria of Article 41(1), cannot be considered ancillary liquid assets under Article 41(2)(b) of the 2010 Law.

For a comprehensive understanding of these updates, you can explore the detailed FAQ on the CSSF website: FAQ Law 17 December 2010 (cssf.lu)

Feel free to reach out to our investment management team if you have any questions.