2 minute read 23 Dec 2020
ey-luxembourg-wealth-asset-management-cost-performance-disclosure-article-v4

Two priority disclosure topics – costs and performance disclosures

2 minute read 23 Dec 2020

ESMA announcement on costs & performance transparency

ESMA announced on 13 November that a common supervisory action will be launched in 2021 to improve supervision and enforcement convergence and ensure proper implementation of its guidelines on performance fees performance fees in UCITS and certain types of AIFs1 and its supervisory briefing on the supervision of costs2.

The translations of the ESMA guidelines on performance fees into all EU official languages were published on 5 November 2020. The guidelines will therefore become applicable as of 6 January 2021 for all new funds or existing funds introducing a performance fee after this date. Funds with a performance fee existing before this date should comply from the beginning of the financial year following 6 July 2021.

While the ESMA supervisory briefing does not bind investment fund managers directly, they are still expected: 

  • To benchmark fee structures of the funds they manage against funds with similar investment policies, 
  • To benchmark fee structures of the funds they manage against funds with similar investment policies,     
  • To have proper governance in place for the determination and the review of costs charged to the funds
  • To implement disclosure to prevent any impression of excessive or duplicate costs being charged to investors, in particular where conflicts of interests have been identified, notably as a result of third-party payments.

ESMA will also possibly continue its coordination of work of the National Competent Authorities in the area of closet indexing.


For more information, please visit: ESMA annual work programme

1See EY Luxembourg Market Pulse Regulatory Update, March 2020 edition

2See EY Luxembourg Market Pulse Regulatory Update, July 2020 edition

Summary

ESMA announced that a common supervisory action will be launched in 2021 to improve supervision and enforcement convergence and ensure proper implementationof its guidelines on performance fees performance fees in UCITS and certain types of AIFs and its supervisory briefing on the supervision of costs.

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