EU Priips proposal alarms providers

EU Priips proposal alarms providers

Fund groups have criticised plans to ditch past performance figures from investor documents in favour of future projections, with one asset manager dubbing the proposal “potentially misleading”.

New European rules governing packaged retail and insurance-based investment products (Priips) will bring in changes to fund disclosure practices, including the establishment of a key investor document (Kid).

Under proposals set to come into force from the end of 2016, the Kid, which is set to replace the existing key investor information document (Kiid), will introduce forward projections of an investment vehicle’s performance. Providers would be obliged to detail their expected returns over one, three and five years in different hypothetical market conditions.

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Ucits products have a three-year exemption, but current proposals, which would eschew the use of past performance figures, have been criticised by some industry participants.

In its response to a Priips consultation by the European Securities and Markets Authority (Esma), Schroders – which described past performance data as “appropriate where available” – warned: “We consider the use of forward projections as potentially misleading.”

It added: “The use of projections was actively considered” [when discussing the introduction of the Kiid] but “was rejected on the grounds that they were misleading”. It noted “that past performance figures are a long-established way of assisting consumers in their consideration on whether to invest”.

Schroders requested a caveat be included underneath the performance projections to clarify “that a product manufacturer cannot be liable if the actual performance (or specifically underperformance) is worse than that projected”.

French asset manager Amundi voiced similar concerns in its own response, noting that future projections could leave providers vulnerable to challenges from aggrieved clients. “Applying [the use of future performance scenarios] to usual funds or to life insurance products will drive in many cases to irrelevant assumptions which could only provide illusion to investors, with very detrimental effects in case of litigation,” it said.

“Past performances have always been the best way in order to compare management skills for funds invested in the same asset class because recurrent return gaps between various funds provide a clear indication about the quality of asset management teams.”

The Investment Association also defended past performance figures, calling them “the only true qualitative source of information available when it comes to performance of investment products”.

The trade body described the inclusion of historic figures in investor documents as “very useful”, adding: “It would ensure consistency with the Kiid.”

The IA also highlighted a discrepancy in Esma’s proposals, noting that its draft regulatory technical standards still suggest using past performance figures when assessing other areas.



Maximum number of A4 pages for a Kid


The date Priips comes into force and Kids are introduced


Date by which the European Commission must review Priips regulations


Date on which Kids are scheduled to come into force for Ucits funds