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UCITS and the KID

UCITS is the EU’s rulebook for funds sold to the public. The KID is the three-page summary every one of them must give you.

What the rules ask

A UCITS fund must spread its money: no more than 10% in one company, and the holdings above 5% may add up to 40% at most. A separate bank, the depositary, keeps the fund’s assets and checks the manager.

The KID

The Key Information Document is at most three pages: what the fund does, a risk number from 1 (low) to 7 (high), what it costs each year, and what you could get back in good and bad years.

Read the risk number well

The risk number mostly measures how much the price has swung. A world share fund is usually 4 or 5. It does not tell you how spread out a fund is, or whether it fits your plans.

Why US funds are missing

Funds listed in the US do not publish a KID, so brokers in the EU do not sell them to ordinary investors. European funds that follow the same indexes fill the gap.

Key takeaways

  • UCITS funds must spread their money and keep it with a separate bank.
  • Every fund gives a KID: what it does, its risk number, its costs.
  • The risk number is about swings, not about whether the fund suits you.