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Investment funds

EU laws and initiatives relating to collective investment funds.

What are investment funds?

Investment funds are investment products created with the sole purpose of gathering investors' capital, and investing that capital collectively through a portfolio of financial instruments such as stocks, bonds and other securities.

Investment funds play a crucial role in facilitating the accumulation of personal savings, whether for major investments or for retirement. They are also important because they make institutional and personal savings available as loans to companies and projects which contribute to growth and jobs.

Collective investment funds

As part of its effort to create a barrier-free market for collective investment funds, the EU enacted the following legislation.

Undertakings for collective investment in transferable securities

The directive on undertakings for collective investment in transferable securities (UCITS) is the main European framework covering collective investment schemes. This category of investment funds accounts for around 75% of all collective investments by small investors in Europe.

Alternative investment fund managers

The alternative investment fund managers directive (AIFMD) covers managers of alternative investment schemes designed for professional investors. Alternative investment funds are funds that are not regulated at EU level by the UCITS directive. They include hedge funds, private equity funds, real estate funds and a wide range of other types of institutional funds.

Since its adoption in 2011, the AIFMD has supported the creation of an efficient single market for alternative investment funds (AIFs) and built a strong regulatory and supervisory framework for AIFMs in the EU. As part of the capital markets union (CMU) package of 25 of November 2021, the Commission adopted a legislative proposal that recommends amending the AIFMD framework to make the AIF market even more efficient, improve investor protection and enable better monitoring and managing of risks to financial stability by. A reviewed framework will directly contribute to the three key objectives of the CMU, as set out in the CMU communication.

European venture capital funds

The European venture capital funds (EuVECA) regulation covers a subcategory of alternative investment schemes that focus on start-ups and early stage companies. Venture capital investment is an important source of long-term financing to young and innovative companies.

European social entrepreneurship funds

The European social entrepreneurship funds (EuSEF) regulation covers alternative investment schemes that focus on social enterprises. These are companies that are set up with the explicit aim to have a positive social impact and address social objectives, rather than only maximising profit. While these enterprises often receive public support, private investment via funds still remains vital to their growth.

European long-term investment funds

The European long-term investment funds (ELTIF) regulation covers funds that focus on investing in various types of alternative asset classes such as infrastructure, small and medium sized enterprises and real assets.

Regulation on money market funds

Money market funds (MMFs) are investment vehicles where households, corporate treasurers or insurance companies can obtain a relatively safe and short-term investment for surplus cash. They are an important source of short-term financing for financial institutions, corporates and governments. In order to preserve the integrity and stability of the internal market, the EU adopted a regulation on MMFs that will make them more resilient to a future financial crisis.

Retail investment products

Investment products are complex and it can be difficult to compare them or fully grasp the risks they involve. To protect investors, the EU has adopted a regulation introducing a key information document (KID), a simple document giving investors key facts in a clear and understandable manner.

A KID is required for products including 

  • all types of investment funds 
  • insurance-based investments
  • retail structured products
  • private pensions

Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs)

Measures on cross-border distribution of funds

Measures to facilitate cross-border distribution of funds are contained in Directive and Regulation that complement and amend a existing EU legislation on collective investment funds. It is expected to increase transparency and create a single access to information on national rules related to marketing requirements and regulatory fees and charges levied by national competent authorities.

The package allows for simpler exit of the host market (de-notification), and permits management companies to choose more flexible and cheaper ways of communication and provision of administrative services to investors in other Member States and create conditions for promotion of AIFs and investment strategies and seek for new investors before using the passport for marketing.

The two legislative acts form part of the European Commission’s action plan for a capital markets union to help build a true single market for capitals across the EU, and fall under the objectives of fostering investments across the EU, a key pillar of the investment plan for Europe.

Relevant legislation


  • Study
  • Directorate-General for Financial Stability, Financial Services and Capital Markets Union

Study: Testing draft EU ecolabel criteria on UCITS equity funds

On the application of proposed Ecolabel criterion 1 to a sample of UCITS equity funds to determine the potential eligibility of existing market products

  • Directorate-General for Financial Stability, Financial Services and Capital Markets Union

Consultation on investment funds

Consultation on UCITS, Product Rules, Liquidity Management, Depositary, Money Market Funds, Long-term Investments