ESMA consults on performance fee guidelines for retail funds


ESMA bond liquidity data

Busy days for the EU’s securities markets’ regulator ESMA, as the regulator has just published a public consultation on draft guidelines on performance fees under the Undertakings for Collective Investments in Transferable Securities (UCITS) Directive.

LeapRate reminds that last week, ESMA has published a statement, addressed to providers marketing, distributing or selling CFDs to retail clients and has also fined the trade repository Regis-TR S.A. €56,000 for negligently failing to provide to regulators direct and immediate access to details of derivative contracts.

ESMA’s newest draft guidelines aim to harmonise the way in which performance fees can be charged to the UCITS and its investors while ensuring common standards of disclosure, as current practices vary among EU Member States.

Steven Maijoor
Steven Maijoor, ESMA

Steven Maijoor, ESMA Chair, commented:

Costs are vital to successful investments and especially so when investing in UCITS. Performance fees are a key feature both for investors and funds alike. However, different practices exist, creating undue risks of regulatory arbitrage and inconsistent levels of investor protection.

Considering the importance of cross-border distribution for UCITS, ensuring greater supervisory convergence regarding performance fees is essential.

ESMA’s draft guidelines propose common criteria to promote supervisory convergence in the following areas:

  • general principles on performance fee calculation methods;
  • consistency between the performance fee model and the fund’s investment objectives, strategy and policy;
  • frequency for the performance fee crystallisation and payment;
  • the circumstances where a performance fee should be payable; and
  • disclosure of the performance fee model.

The regulator informed that it is seeking stakeholders’ feedback on the proposals made in the above areas as well as on whether the principles set out in the Guidelines should also be applied to Alternative Investment Funds (AIFs) marketed to retail investors.

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ESMA consults on performance fee guidelines for retail funds

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