ESMA issues guidance on performance fees in UCITS
06 April 2020 Brussels
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The European Securities and Markets Authority (ESMA) has provided final guidance on performance fees in investment funds, applicable to UCITS and certain types of alternative investment funds (AIFs), in order to ensure a “level playing field and a consistent level of protection to retail investors”.
According to ESMA, the guidelines are set to help fund managers when designing performance fee models for the funds they manage, including the assessment of the consistency between the performance fee model and the fund’s investment objective, policy and strategy, particularly when the fund is managed in reference to a benchmark.
The EU’s securities markets regulator highlighted that the guidelines aim to harmonise the way fund managers charge performance fees to retail investors, as well as the circumstances in which performance fees can be paid.
The common requirements will allow convergence in how national competent authorities (NCAs) supervise performance fees models and disclosure across the EU.
ESMA said: “Ensuring greater supervisory convergence regarding performance fees in funds marketed to retail investors is an integral part of ESMA’s broader efforts on the cost of retail investment products.”
The guidelines will now be translated into the official EU languages and published on ESMA’s website. ESMA said the publication of the translations will trigger a two-month period during which NCAs must notify ESMA whether they comply or intend to comply with the guidelines.
According to ESMA, the guidelines are set to help fund managers when designing performance fee models for the funds they manage, including the assessment of the consistency between the performance fee model and the fund’s investment objective, policy and strategy, particularly when the fund is managed in reference to a benchmark.
The EU’s securities markets regulator highlighted that the guidelines aim to harmonise the way fund managers charge performance fees to retail investors, as well as the circumstances in which performance fees can be paid.
The common requirements will allow convergence in how national competent authorities (NCAs) supervise performance fees models and disclosure across the EU.
ESMA said: “Ensuring greater supervisory convergence regarding performance fees in funds marketed to retail investors is an integral part of ESMA’s broader efforts on the cost of retail investment products.”
The guidelines will now be translated into the official EU languages and published on ESMA’s website. ESMA said the publication of the translations will trigger a two-month period during which NCAs must notify ESMA whether they comply or intend to comply with the guidelines.
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