Which statement describes UCITS funds' investment policy?

• A. They may only invest in cash and cash equivalents.
• B. They cannot invest in equities.
• C. They must invest primarily in transferable securities.
• D. They must invest primarily in government bonds and deposits.

Answer: (C)

UCITS funds are designed to be easily redeemable and widely marketable for retail investors. Their investment policy centers on holding assets that are readily tradable in the market, i.e., transferable securities. These include shares, bonds, and other negotiable instruments that can be bought and sold on recognized markets with price transparency. By requiring the portfolio to be invested primarily in transferable securities, UCITS funds ensure liquidity, price discoverability, and the ability to diversify across issuers and markets. The remaining assets can be other liquid instruments or cash-related holdings, but the core exposure must be to transferable securities to maintain the fund’s liquidity and standardization across markets. Options that suggest limiting to cash, excluding equities, or focusing only on government bonds and deposits don’t capture this essential, market-tradable asset focus.