IMA calls on regulators to clarify Ucits IV stance

Andy Maysey, senior adviser for retail distribution at the investment management trade body, warned that different jurisdictions were allowing managers greater flexibility when reporting fund charges in the Key Investor Information Documents (Kiids).

Mr Maysey said: “We are aware of different interpretations of Ucits IV by different jurisdictions. The big call from us is for harmonisation – information should be consistent across all member states.”

From June 30 all funds will be required to publish Kiids annually for each share class of each fund, in place of the simplified prospectus.

Kiids must include figures for a fund’s entry and exit charges, performance fees and its ongoing charges. The latter is a replacement for the total expense ratio (TER), and according to the European Securities and Markets Association (Esma), must include all fees and expenses relating the fund’s management, depositary, service providers, distribution, auditing and legal and regulatory costs.

However, Esma says its list of included costs is “indicative but not exhaustive”, which has allowed some jurisdictions to exclude some costs.

The IMA’s call for harmonisation comes as it is attempting to resist pressure from some of its members for an industry standard within the UK to help clarify the total cost of investing. Earlier this month Legal & General Investments joined HSBC Global Asset Management and BlackRock in calls for fund charges to be disclosed in a more transparent way, but the IMA has insisted that the TER measure is adequate.

According to Investment Adviser’s sister publication Ignites Europe, the French regulator AFG earlier this month voiced concerns that jurisdictions such as Luxembourg have also allowed funds more flexibility regarding “non-approved” assets than in other countries.

This refers to a 10 per cent maximum allowance for Ucits funds to invest in unlisted assets or non-Ucits funds.

The AFG said the different interpretations could give Luxembourg-domiciled funds an unfair advantage over those based in other jurisdictions.

Karen Bowie, the IMA’s senior adviser for product regulation, said this discrepancy has been an issue since the introduction of Ucits III in December 2001.

“There is a definite case for more harmonisation and a better understanding of what should and shouldn’t be included in this 10 per cent,” she added.

Meanwhile, Mr Maysey said the majority of IMA members were ready to publish Kiids if they had not done so already.