This study employs stochastic dominance methodology to compare the performance of UCITS (Undertakings for Collective Investment in Transferable Securities, i.e. investment funds that have been established in accordance with UCITS Directive adopted in 1985) and non UCITS investment funds. Based on a sample of 100 UCITS and 100 non UCITS funds, we find that non UCITS bond funds stochastically dominate UCITS bond funds whereas UCITS equity funds dominate non UCITS equity funds. We can infer from this result that risk–adverse investors prefer non UCITS bond funds and UCITS equity funds in order to maximize their expected utility. The UCITS III directive does not encourage risk–adverse investors to choose UCITS bond funds in order to maximize their expected utility.