Mario Mantrisi, Chief Product Management and Innovation Officer, KNEIP
As European managers finalize their initial Key Investor Information Documents (KIIDs), it is already time to start thinking about producing and disseminating the next KIIDs. While the majority of fund managers have learnt from the experiences of implementing the first KIID, the process still remains daunting, as there are several events that now require asset managers to update, reproduce and redisseminate KIIDs on an ongoing basis.
The UCITS IV rules outline the conditions and the deadlines for the review and revision of KIIDs, which include changes in the prospectus, the fund rules, ongoing charges, synthetic risk and reward indicator (SRRI) and a mandatory yearly review/revision. This means that the processes that took many asset managers several months to accomplish during this first round, i.e., aggregating data, developing content and producing, translating and disseminating the documents, must now be improved.
Responding to these criteria not only creates pressure on asset managers processes but also puts a strain on their resources. With the exception of the yearly revision, there is no timeline or schedule for required updates. This creates unpredictable and uneven resource requirements. Regular monitoring of several criteriaalong with reporting to KIID teams so they can then handle production and disseminationmust be put into place. Resource management is a major concern in the KIID lifecycle.
These challenges are all the more testing for fund managers, as they are solely responsible and accountable for ensuring the accuracy, relevance and timeliness of the data and commentary in their KIIDs. Failure to comply with any of these requirements exposes fund managers to severe risks. And whilst regulators currently collect, record and store the KIIDs that are submitted, they only sporadically check the accuracy and timeliness of the documents they receive. Given the high volume of documents to be produced (over 300,000 KIIDs are expected for Luxembourg funds alone), regulators decision not to police every single KIID does not come as a surprise, but does remove a potential safety net for fund managers.
Preparation and anticipation are therefore key in order to fully embrace the regulatory requirements and ensure a robust process enabling timely, consistent and high-quality KIIDs. The most efficient way to achieve this is to put in place automated processes that would aggregate data and produce the documents. In addition, delegating non-core tasks such as translation and dissemination would allow asset managers to concentrate on ensuring that they achieve the fundamental objective of the KIID: to provide clear and up-to-date information. If these processes are well resourced and workflows effectively managed around commercial activities, fund managers should be well positioned to roll out their second and subsequent KIIDs within prescribed deadlines.
While the fund management industry is still getting comfortable with KIID production, the benefits of the document are noticeable. So much so that the European Commission has announced plans for it to be extended to a wider range of packaged retail investment products. Policy-makers in Brussels are keen for the KIID to become the benchmark for fund marketing literature in non-UCITS funds, and there have already been talks of including a variation of the KIID in the Institutions for Occupational Retirement Provisions, the main pensions directive. If these plans move ahead, there will be an entire wave of new players that will have to acquaint themselves with the KIID and overcome the same challenges faced by fund managers over the last 12 months.