On 28 May 2021, the European Securities and Markets Authority (ESMA) published its updates to various Questions and Answers (Q&As) for numerous industry sectors. As relevant to the funds industry, we highlight those related to the AIFMD and UCITS regimes. Next week, we will cover off the new Q&As for investment firms.
The updates to the AIFMD Q&As deal with:
- Reporting requirements to National Competent Authorities (NCAs) on fund data including price changes and measurements on portfolio yield curves (NET DV01); portfolio sensitivities to credit spreads (NET CS01) and portfolio sensitivity to movements in equity prices (Net Equity Delta). See further new Q&As 84 to 86 in Section III.
- Guidelines on performance fees (relevant to UCITS and AIFs) in section XV of the Q&As:
- New Q&A 4 – are registered AIFMs referred to in Article 3(2) of the AIFMD subject to ESMA’s guidelines on performance fees while marketing to retail investors units or shares of AIFs they manage? In strict terms no, but member states and NCAs may extend regulation in these circumstances on a national basis.
- New Q&A 5– provides guidance on the setting of performance fees and performance reference periods for funds and AIFMs using a benchmark model to gauge and assess performance.
- New Q&A 6– provides guidance on the setting of performance reference periods where a restructuring of AIFs occurs resulting in a newly established fund with no performance history (but which economically represents a continuation of a prior AIF).
The UCITS Q&A is also updated to reflect the new commentary on performance fees as outlined above in respect of the AIFMD Q&A.
Q&A on the application of the AIFMD can be found here.
Q&A on the application of the UCITS Directive can be found here.