Core constraints include the 5/10/40 rule limiting single-issuer concentration, a cap on uncollateralised counterparty exposure, restrictions on borrowing, and a requirement that holdings be sufficiently liquid to meet at least fortnightly dealing.
Because the rules are strict and recognisable, UCITS funds are widely distributed well beyond Europe. Many investors outside the US use Irish or Luxembourg domiciled UCITS to hold global equities, partly for the treaty rates on dividend withholding and partly for estate-tax reasons.
The framework shapes product design: it is why many European funds use synthetic-replication, why accumulating-share-class variants are common, and why certain US-style leveraged products cannot be sold as UCITS at all.
Related: synthetic-replication, withholding-tax-drag, share-class, etf, mutual-fund