ALFI UCITS IV implementation project – KID Q&A Document
ALFI UCITS IV implementation project – KID Q&A Document
ALFI UCITS IV implementation project – KID Q&A Document
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Page 5, Para 6(b)Q. Does this paragraph apply only to funds of funds?A. No. It applies to every <strong>UCITS</strong> that acquires the units of another <strong>UCITS</strong> or collective investment undertaking.Page 5, Para 8Q. What constitutes a "substantial proportion" of assets for the purpose of applying this paragraph and doesthe CESR advice mean to reference Art 55(3) of the <strong>UCITS</strong> Directive rather than Art 50(3)?A. We note that Circular CSSF 03/122 in respect of the simplified prospectus says that "if a <strong>UCITS</strong> invests more than20% of its assets in other investment funds which publish a TER in accordance with this circular, a synthetic TERcorresponding to such investment must be indicated." Although Circular CSSF 03/122 will not apply to the <strong>KID</strong>,practitioners may wish to take it into account it when deciding what "substantial" means.In the EU, the home state regulator's guidance should normally be respected. If an EU host state regulatorrecommends a lower threshold then practitioners may choose to apply it but they would risk no sanction if they did not.The reference to Art 50(3) in paragraph 8 of CESR/10-674 is a typographic error. The correct reference is to Art 55(3).Page 6, Para 8(d)Q. CESR's paper says, "where CIUs falling within (c) represent less than 15% of the <strong>UCITS</strong> assets …". Is itacceptable to determine the 15% at a single date (for example, 31 December) or is it necessary to calculate thevolume-weighted average of such holdings on every day in the year?A. We think that it is acceptable to test the 15% threshold on 31 December only and to analyse the underlying <strong>UCITS</strong>'or CIU's ongoing charges on the same "snapshot" basis on the same date. This is consistent with the spirit of themethodology, which at paragraph 15(a) requires "the ongoing charges figure … of each underlying CIU [to be] proratedaccording to the proportion of the <strong>UCITS</strong>' net asset value which that CIU represents at the relevant date (beingthe date at which the <strong>UCITS</strong> figures are taken)."Page 6, Para 8(e)Q. Can we understand this paragraph to mean that if a <strong>UCITS</strong> receives a rebate of charges from a fund inwhich it invests and the <strong>UCITS</strong> assessment of the ongoing charge of that underlying fund as preparedaccording to paragraphs 8(a), (b), (c) or (d) did not take account of the rebate, the <strong>UCITS</strong> may reduce theaggregate result of its calculation by the rebate amount?A. Yes.Q. Must this be applied only in respect of rebates that have been received?A. It may be applied to rebates that have been received and to rebates that have been accrued. The practitioner maydecide the method that it thinks appropriate.Q. Should funds of funds include the performance fee of underlying funds in their calculation of the ongoingcharges figures?A. No. Paragraph 8 of CESR/10-674 requires funds of funds "to take account of the ongoing charges incurred in theunderlying CIUs", and explains how that may be done in several circumstances, none of which require the underlyingCIU's performance fees to be taken into account. Paragraph 8(a) is a good example: only the underlying CIU's "mostrecently available ongoing charges figure shall be used," which means the figure calculated in accordance withCESR/10-674, which at Paragraph 5(b) explicitly excludes "a performance fee payable to the management companyor any investment adviser."Page 6, Para 8(f)Q. Should an underlying fund's entry/exit charges be included in the ongoing charge of the holding fund's<strong>KID</strong>?A. Yes. See paragraph 8(f) of CESR/10-674 and Art 30 of EU Regulation 583/2010.<strong>ALFI</strong> <strong>KID</strong> Q&A, Issue 1314, 11 April25 September 2012 Page 49