Response to joint Discussion Paper on Key Information Documents (KIDs)

Go back

3: Do your agree that market, credit and liquidity risk are the main risks for PRIIPs? Do you agree with the definitions the ESA’s propose for these?

We would agree with this proposal.

4: Do you have a view on the most appropriate measure(s) or combinations of these to be used to evaluate each type of risk? Do you consider some risk measures not appropriate in the PRIIPs context? Why? Please take into account access to data.

See response to Question 12 re display. We would propose that a description of the particular risks for each of the three categories should be shown on the KID.

6: Do you think that performance scenarios should include or be based on probabilistic modelling, or instead show possible outcomes relevant for the payouts feasible under the PRIIP but without any implications as to their likelihood?

The use of probabilistic performance modelling is not generally favoured by UCITS manufacturers, who are by and large happy with the historical performance graph as shown in the current UCITS KIID. Feedback is that the compilation of these models may be complex, open to interpretation and lead to additional costs to the manufacturers.

8: What time frames do you think would be appropriate for the performance scenarios?

In our view this section of the KID should have flexibility based upon the characteristics of the individual PRIIP. To be meaningful to the end investor, a 20 year with-profits life assurance policy should have a disclosure over a much different time frame than an investment in a retail cash fund.
We would propose that a clear and concise definition of the disclosure requirements be prepared for each of the main product categorisations as outlined in Section 1.6.2 of the Discussion paper.

12: Do you have any views, positive or negative, on the different examples for presentation of a summary risk indicator? Please outline advantages and disadvantages, and provide any other examples that you are aware of that you think would be useful.

Industry feedback from the UCITS manufacturers would indicate satisfaction with the display of one single risk indicator. General opinion is that the inclusion of more than one risk indicator may prove extremely confusing to the end investor.
The proposed inclusion of risk statistics is admirable but we would not be certain that terms such as Expected Shortfall or ELVaR would be readily understood by the end retail investor.

13: Do you have any views, positive or negative, on the different examples for presentation of performance scenarios? Please outline advantages and disadvantages, and provide any other examples that you are aware of that you think would be useful.

See response to Question 6. Should the proposal to use forward looking performance scenarios carry through we would propose that the disclosure would be based off an average of historical (actual or synthetic) performance over a pre-defined timeframe for each product. Should an optimistic or pessimistic scenario also be required, we would propose that a well-defined methodology for calculating these scenarios be contained in the upcoming consultation paper which would allow for ready comparison across PRIIPs.

20: Do you agree that a RIY or similar calculation method might be used for preparing ‘total aggregate cost’ figures?

UCITS manufacturers have strongly indicated that they would prefer to see the current cost disclosure requirements becoming standard for the PRIIPs KID.

21: Are you aware of any other calculation methodologies for costs that should be considered by the ESAs?

UCITS manufacturers have strongly indicated that they would prefer to see the current cost disclosure requirements becoming standard for the PRIIPs KID.

24: Do you have any views on possible assumptions that should be made, and how these might be calibrated or set?

Certain costs are conditional upon the length of time an investor may remain invested in the product. In order to make the cost structure clear to end retail investors it may prove necessary to illustrate more than one scenario, particularly where early exit costs and CDSCs apply.

27: In terms of a possible breakdown of costs, are you aware of cost structures for which a split between entry or exit costs, ongoing costs, and costs only paid in specific situations or under specific conditions, would not work?

See response to Question 12 re display. We would propose that a description of the particular risks for each of the three categories should be shown on the KID.

29: How do you think should cumulative costs be shown?

UCITS manufacturers have strongly indicated that they would prefer to see the current cost disclosure requirements becoming standard for the PRIIPs KID.

Name of organisation

FundAssist