The UK government has granted equivalence for UCITS ETFs under the Overseas Fund Regime.
In a statement, the Treasury announced that equivalence would be granted for all UCITS vehicles in the European Economic Area (EEA) including EU-member states.
The long-awaited move means asset managers will continue to be able to sell UCITS ETFs in the UK and comes after the Financial Conduct Authority (FCA) launched a consultation on the OFR rules in December 2023.
The new rules are set to be rolled out from April and are seen as key to removing post-Brexit barriers for new EU-domiciled ETFs when entering the UK.
“Today I can confirm that, following a detailed assessment, the government has found the EEA states, including the EU member states, equivalent under the OFR,” Bim Afolami, economic secretary to the Treasury, said.
He added the decision will apply to UCITS except for money market funds where there is “ongoing regulatory development”.
The government also confirmed it would be extending the FCA’s current Temporary Permissions Regime (TPR) by a year to the end of 2026 “to ensure funds can smoothly transition to the OFR”.
"Asset managers often set up their investment funds internationally, marketing their funds to investors in the UK and around the world,” Afolami said.
“Today’s announcements demonstrate the government’s commitment to maintaining a safe, open and globally integrated financial system, enabling international financial services business by reducing barriers and frictions, where safe and practicable.”
The unique distribution of UCITS ETFs as a pan-European product versus other structures means the decision is of particular importance for the wrapper.
Jonathan Lipkin, director of policy, strategy and innovation at the Investment Association, said: “We strongly welcome today’s confirmation from HM Treasury that UK investors will continue to benefit from the full range and choice of European funds, including ETFs.
“Under the regime, EEA states, including EU members, will be considered equivalent under the OFR for UCITS. It also cements the UK’s place as the leading global centre for investment management.”
The ongoing uncertainty around UCITS equivalence has led to European giants such as Amundi and AXA Investment Managers waiting for clarity before registering their Irish Collective Asset-management Vehicles (ICAVs) for sale in the UK.