The IMA has voiced concerns that different jurisdictions are allowing managers greater flexibility when reporting fund charges in the Key Investor Information Documents (KIID) under UCITS IV reported FTAdviser this week. Andy Maysey, senior adviser for retail distribution at the investment management trade body said the IMA was aware of different interpretations. “The big call from us is for harmonisation,” said Maysey, adding that information should be consistent “across all member states”. From June 30 managers will be required to replace their simplified prospectus with the KIID, which is designed to bring greater clarity and transparency to retail investors. Details such as fund entry and exit costs, performance fees and ongoing charges, which will replace the total expense ratio, will all be required. With regards to ongoing charges, they must detail all fees and expenses related to the fund’s management, service providers, auditing, legal and depositary costs. The problem seems to be one of interpretation. The European Securities and Markets Association (ESMA) says the list is indicative but not “exhaustive”.
The IMA’s own position is that the TER is an adequate measure, whereas the likes of BlackRock and HSBC Global Asset Management want greater transparency. According to Ignites Europe, the French regulator AFG raised the issue earlier this month of jurisdictions like Luxembourg allowing greater flexibility around “non-approved” assets than other jurisdictions. UCITS funds have a 10 per cent limit on investing in unlisted assets. AFG thinks, quite rightly, that different interpretations could give Lux-domiciled funds an unfair advantage: if true, it could potentially create jurisdictional arbitrage.