Regulatory Alerts2020-11-05
Added · Updated
Guidelines on performance fees in UCITS and certain types of AIFs
The guidelines require managers to ensure that performance fee calculations are verifiable, not manipulable, and proportionate to actual investment performance, prohibiting artificial increases from new subscriptions. They mandate that crystallisation frequency be no more than once a year, with exceptions for high-water-mark, high-on-high, and fulcrum fee models, and require that underperformance be recovered before any fee becomes payable. Managers must demonstrate consistency between the fee model and the fund's investment objectives, ensuring benchmarks used for calculation align with those used for portfolio composition or risk-return profiles. The document also imposes disclosure obligations, requiring prominent warnings in Key Investor Information Documents if fees apply during negative performance and concrete examples in prospectuses.
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