Review of UCITS Performance Fees highlights instances of non-compliance with Guidance

04 September 2018 Press Release

Central Bank of Ireland

  • Fund Management Companies are responsible for the effective oversight of performance fee charges
  • In some instances performance fees were not calculated in accordance with Guidance
  • Concerns flagged that Guidance is not being applied consistently across Industry

The Central Bank has published the outcome of an inspection into UCITS performance fees. The purpose of the review is to establish whether the procedures used to calculate and pay performance fees in UCITS ensure that investors’ interests are protected at all times. The review also examined the methodologies used to calculate performance fees to ensure they are in line with the Central Bank’s UCITS Performance Fees Guidance.

Some of the main issues identified were:

  • In some instances performance fees were not calculated in accordance with the Guidance.
  • Inadequate disclosure informing investors that where performance fees are paid on the basis of the High Water Mark approach, fees may be accrued as a result of market movements rather than due to the performance of the investment manager.
  • Where performance fees are based on the outperformance of an index, it was unclear as to which version of the index was being used in some cases.
  • Poor practices were observed at Depositaries in the verification of the calculation of performance fees.
  • Poor practices were observed at Fund Administrators in certain areas of the calculation of performance fees.

The Central Bank of Ireland’s Director General Financial Conduct, Derville Rowland said: “We are concerned that the Guidance is not being applied in a consistent and comprehensive manner across Industry, which could lead to the overpayment of performance fees by UCITS and their investors.

“Investors in regulated funds have a right to expect that they will be charged the right fee and that the firms and individuals overseeing this process are operating to a high standard. The findings of this review highlight the need for individuals within regulated firms to be vigilant, especially as we now move to have our Guidance on performance fees become binding rules. We are requiring all fund management companies whose UCITS charge performance fees to review their existing methodologies and confirm their compliance to the Central Bank, and we will continue to engage with those individual UCITS that were the subject of this review and to monitor fees charged to ensure that the best interests of investors are protected.”

All Fund Management Companies whose UCITS charge performance fees are required to confirm to the Central Bank that they have carried out a review of the existing methodologies in order satisfy themselves that performance fees charged comply with the Guidance. The Central Bank will also commence supervisory engagement with the individual UCITS that were the subject of the review.


This review was carried out in parallel to Consultation Paper 119, which proposes that this Guidance will be transitioned into Central Bank UCITS Regulations by year-end 2018.

UCITS are open-ended investment funds and may be established as:

  • Unit trusts;
  • Common contractual funds;
  • Variable or fixed capital companies; or
  • Irish Collective Asset-management Vehicles (ICAVs).

UCITS established in Ireland are authorised under the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011.
Further information is available on the Central Bank’s website.