UCITS Publication of a Key Investor Information Document  

Introduction

1. This note provides guidance on the publication of a Key Investor Information Document (‘KIID’) and the information which should be included therein.  It takes into account the following pieces of legislation and European Securities and Markets Authority (“ESMA”) Level 3 Guidance in this area:

  • Directive 2009/65/EC (“the UCITS Directive”);
  • Commission Regulation (EU) 583/2010 of 1 July 2010 (“Commission Regulation”);
  • CESR/10-1320 – ESMA’s guide to clear language and layout for the Key Investor Information document;
  • CESR/10-1321 – ESMA’s template for the Key Investor Information document;
  • CESR/10-1318 - Selection and presentation of performance scenarios in the Key Investor Information document for structured UCITS;
  • CESR/10-673 - ESMA’s guidelines on the methodology for the calculation of the synthetic risk and reward indicator in the Key Investor Information Document;
  • CESR/10-674 – ESMA’s guidelines on the methodology for the calculation of the ongoing charges figure in the Key Investor Information Document;
  • Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the “Central Bank UCITS Regulations”);
  • European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 ("UCITS Regulations"). 

Note - CESR/10-1320, CESR/10-1321, CESR/10-1318, CESR/10-673 and CESR/10-674 are collectively referred to throughout this document as “ESMA KIID Guidelines”.

2. This guidance clarifies certain aspects of the Commission Regulation, the ESMA KIID Guidelines and the Central Bank UCITS Regulations and provides guidance for their practical application in drafting a KIID.

Presentation and Language

 

3. The purpose of the KIID is to ensure that the content of the information is relevant, the organisation of the information is logical and the language is appropriate for retail investors.  The KIID should engage investors, assist them in making an informed investment decision and facilitate comparisons through its format, presentation and the quality and nature of the language used.

4.   Each section within the KIID should follow the same running order and have consistent headings.

 

Investment Objective and Policy - General

 

5.  The prospectus of each UCITS will contain a full description of the investment objective and policy of the UCITS.  The purpose of the investment objective and policy section in the KIID is not to reproduce that description but to set out in plain and concise language what the UCITS aims to do and how it will go about achieving this aim.  

6.    A responsible person should ensure that the following are included in the KIID:

(a)    a statement of the investment objective of the UCITS, stated clearly so as to allow an  investor to assess the suitability of the UCITS for the investor’s needs;

(b)   an explanation of how the investment objectives of the UCITS will be achieved.  This could be done, for example, by exposure to particular markets or specific instruments or through the application of a particular formula.  A description of the investment strategy may be included as well if it is likely to remain in force for a sufficiently long time to be of relevance to prospective investors;

(c)    a statement of the investment instruments that are likely to have a material impact on the performance of the UCITS;

(d)   where a UCITS intends to invest or has invested more than

20 per cent of its assets in other investment funds, a description of the quantitative or qualitative approach that will be taken for selecting the underlying investment funds.  For example, that underlying funds are selected based on their Sharpe ratio or they pay high dividends.  A generic statement, for example, that “the fund selects the most appropriate underlying funds after careful quantitative and qualitative assessment” will not be permitted;

(e)    where a UCITS is established as a feeder fund, a disclosure, where relevant, of the possibility that the UCITS may hold ancillary assets. 

7.   The KIID does not need to contain an exhaustive list of investment instruments.  If there is the potential to invest in a wide variety of investment instruments in different markets, their inclusion should be analysed based on past and expected usage.  

 

Risk and Reward Profile - General

  

8.  The impact of some material specific risks, for example, credit, counterparty, liquidity or operational risks may not be fully captured by the synthetic indicator.  It is the responsibility of the UCITS to identify the material risks not adequately captured by the indicator and to ensure that those risks are captured by the risk management function of the UCITS.  The narrative presentation of the material risks shall be fair, clear and not misleading.

 

Risk and Reward Profile – Feeder Funds

 

9.  Regulation 74(2)(b) of the Central Bank UCITS Regulations requires that the description of the risk and reward profile shall not be materially different to the risk and reward profile of the corresponding master UCITS.  It should be possible for the feeder UCITS to copy this information from the KIID of the master UCITS .

Charges - Performance Fees 

10. Where no performance fee is being paid out of the assets of the UCITS, it should be disclosed as “none” in the table of charges.  

Charges - Portfolio Transaction Costs

11.  Where the potential impact of portfolio transaction costs on the return to investors is known by the responsible person or is considered by them as being likely to be material, the KIID should include a statement that these costs are paid out of the assets of the UCITS.

12.  A disclosure for the purposes of paragraph 11 should be made in the investment objectives and policy section of the KIID.

Cross-References to Other Sources of information (Sign-posting)

13.  The KIID may signpost to information which may be useful to the investor.  A responsible person should ensure that the KIID:

(a)    uses cross-referencing only to the extent that is essential; and

(b)   is not, by reason of cross-referencing or otherwise, presented in a way that prevents an investor comprehending the essential information.

14.  Other sources of information include the prospectus, annual or half-yearly reports and the website of the UCITS.  While it is acceptable to use several signposts within the KIID, the number of cross references should be kept to a minimum. 

15.  Any cross-reference in a KIID should direct the reader to a specific section of the relevant source of information.  For example, the performance fee disclosure may cross refer to the section within the prospectus dealing with charges.

16. The Central Bank does not recommend cross referencing to specific page numbers of the prospectus as any non-material amendment to the prospectus of the UCITS may result in an amendment to the KIID referencing.  The longevity of the cross referencing may be increased by avoiding reference to specific page number.

17. Every cross-reference to the prospectus or to the annual or half-yearly financial statements of a UCITS should be to the then-current version of the relevant document.

Application of the KIID to Share Classes

18. Where charging structures differ between share classes, the Central Bank considers the share class with the highest overall charge to be the most appropriate representative share class, to avoid the risk of understating charges or overstating performance.  However, it is the responsibility of the UCITS to select the most suitable representative share class having regard to the characteristics of the UCITS, the nature of the differences between share classes in the UCITS and the range of choices on offer to each investor.  

Updates

19. A responsible person should review the KIID of a UCITS before undertaking any new initiative that is likely to result in a significant number of new investors acquiring units in the relevant UCITS.

20. The KIID should be reviewed and revised as appropriate as frequently as it is necessary to ensure that it continues to meet the requirements of the UCITS Regulations, the Central Bank UCITS Regulations and the Commission Regulation. 

Filing Requirements 

21. A KIID should be submitted to the Central Bank prior to the authorisation of each UCITS, or approval of a new sub-fund in the context of an umbrella UCITS.  In this case the KIID and the confirmation from the responsible person or its legal advisor, as prescribed below, will form part of the authorisation documents.

22. The responsible person or its legal advisor should confirm in writing to the Central Bank that the KIID complies in full with the requirements of the UCITS Regulations, the Commission Regulation, all related ESMA Guidelines and the Central Bank UCITS Regulations.  This confirmation should also state that the information in the KIID does not conflict with the content of the prospectus, where relevant.

23.  In the case of existing UCITS, a new KIID or an amended KIID and the confirmation from the responsible person or its legal advisor should be forwarded by email to the Central Bank at UCITSKIID@centralbank.ie.  

24.  The Central Bank’s guidance on “Regulatory Reporting Requirements of Irish Authorised Investment Funds” requires annual KIID updates to be submitted via the ONR and not by email to UCITSKIID@centralbank.ie. Updates to KIIDs undertaken throughout the year should continue to be sent via email as set out in paragraph 23 above.

Medium of provision of KIID

25.  Regulation 101(1) of the UCITS Regulations states inter alia:

“Investment companies and, for each of the common contractual funds and unit trusts they manage, management companies, may provide key investor information in a durable medium or by means of a website.”

This includes a website of an entity related to the UCITS, for example the investment manager.
 
Issued:  5 October 2015
Latest revision: 5 October 2015