UCITS Performance Fees

General

1. Performance or incentive fees may be provided for in the prospectus  

Basis for Paying Performance Fees

2. Performance fees should be payable based on:

(a) achieving a new high net asset value per share over the life of the UCITS; or          

(b) out-performance of an index.

3. Where performance fees are payable on the basis of achieving a new high net asset value per share, the responsible person should provide that:

(a) no performance fee is accrued/paid until the net asset value per share exceeds the previous highest net asset value per share on which the performance fee was paid/accrued (or the initial offer price if higher)(the “water mark”); and

(b) the performance fee is only payable/paid on the increase over the “water mark” 

4. Where performance fees are payable on the basis of out-performance of an index, the responsible person should confirm to the Central Bank that:

(a) the index is relevant in the context of the UCITS policy;

(b) the performance fee is payable only on the amount by which the UCITS outperforms the index; and

(c) any underperformance of the index in preceding periods is clawed back (cleared) before a performance fee becomes due in subsequent periods.            

Starting Price

5. Where performance fees are payable on the basis of achieving a new high net asset value per share, the initial offer price should be taken as the starting price for the calculations (i.e. the performance fee payment can only be paid on the subsequent outperformance by the net asset value per share of the initial offer price). 

Depositary Verification

6. The responsible person should provide that the calculation of the performance fee is verified by the depositary. 
Prospectus Disclosure
7. The responsible person should disclose in the prospectus:

(a) the calculation period for determining the fee;

(b) the first calculation period;

(c) how the performance fee is calculated, i.e. whether it’s calculated                    as per paragraph 3 or 4 above;

(d) the amount of the performance fee payable, i.e. the percentage payable; and

(e) accrual basis of performance fee and when it is actually paid.

8. The responsible person should include a risk warning in the prospectus which provides that performance fee is based on net realised and net unrealised gains and losses as at the end of each calculation period and as a result, incentive fees may be paid on unrealised gains which may subsequently never be realised.  

Multi-Manager/Adviser UCITS

9. For multi-manager/adviser UCITS, the performance fee should be payable only on the performance of that part of the portfolio for which the investment manager/adviser is responsible.

10. For multi-manger/adviser UCITS, the responsible person should include a risk warning in the prospectus which provides that it is possible that incentive fees in respect of performance achieved may be payable to one or more of the investment advisers even though the overall net asset value of the fund may not have increased.   

Issued:  5 October 2015
Latest revision: 5 October 2015