Guidelines on performance fees in UCITS and certain types of AIFs

ESMA has published, on 3 April 2020, its final report concerning the “Guidelines on performance fees in UCITS and certain types of AIFs”

Main purpose:

Establish a common standard across EU with respect to performance fees (fees due to an investment manager) calculation, payment and disclosures.

Main topics:

  1. Performance fee calculation method: they list the elements that the calculation method should include.
  2. Emphasis on the fact that performance fee model must be consistent with the fund’s investment objectives, strategy and policy. Guidelines provides with consistency indicators.
  3. Frequency for the crystallisation of the performance fee.
  4. Case of negative performance (loss) recovery.
  5. Disclosure of the performance fee model - impact on: prospectus, UCITS KIID, any ex-ante in-formation documents, marketing material, financial reports and any other ex-post information.

Concerned investment funds:

  1. UCITS.
  2. Alternative Investment Funds (i.e. non-UCITS funds or AIFs) marketed to retail investors, except closed-ended AIFs, and open-ended AIFs that are private equity AIFs, real estate AIFs, EuVECAs, EuSEFs.

Entry into force:

Not yet applicable.

These guidelines will apply from two months after the date of publication of the guidelines on ESMA’s website in all EU official languages.

These guidelines could have an impact on the performance fees of existing funds and will need to be taken into account for the set-up of new funds.

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