Since 1 July 2011 KIIDs started to replace simplified prospectuses for Ucits funds enabling advisers to present clients with a straightforward two-page document that clearly and transparently sets out the characteristics, risks and nature of a fund in an easily digestible way.
Also since this date, all new Ucits funds have been required to have a KIID at launch, but fund houses have been gradually been bringing KIIDs into play across their established product ranges too.
Practicalities
Martin Bock, senior manager, funds segment strategy at RBC Dexia, says: "Getting Ucits asset managers up to speed with KIIDs has been a bumpy road.
"In practice, the volumes and update frequencies for KIIDs make it difficult, costly, inefficient and in many cases even impossible, to use traditional word processor-based documentation production.
"In Europe more than 70% of all fund investments are held through Ucits products. Given the size of the market, KIIDs are set to become the reference for easily accessible investor information, and the appetite of regulators for KIIDs now stretches well beyond the Ucits framework," he adds.
This widening of the KIIDs requirements could present logistical problems for the fund management industry, as early versions sent to regulators under Ucits IV were not meeting plain language requirements, argues Bock.
It is therefore crucial for asset managers to rethink how they describe and formulate their investment policies, so they can do so in plain language.
Will this make advisers’ jobs easier?
While advisers will still have to undertake due diligence and risk-rating to identify the suitability of funds for an investors’ portfolio, a handy two-page document will surely help with preliminary screening.
This will be particularly beneficial in the post-RDR landscape when a whole of market approach must be demonstrated.
"The widening of the KIIDs sphere may also have implications for competitiveness between funds. Distributors [advisers] who are increasingly under pressure to deliver advice and investment education to investors may favour products with well-prepared information sheets. These documents truly have the potential to act as a differentiator in a highly competitive market," Bock concludes.
Have you noticed a difference in the standard of KIIDs between fund houses? Does the layout and quality of information within a KIID have an impact on the funds you consider for clients’ portfolios? Let us know below…
