ESMA updates its Q&A on both UCITS (KIID) and AIFMD
On 26 March 2015, ESMA published two revised ‘Questions and Answers’ documents; an updated ‘Q&A on Key Investor Information Document (KIID) for UCITS’ (KIID Q&A) and an updated ‘Q&A on the Application of the AIFMD’ (AIFMD Q&A).
Questions and Answers on Key Investor Information Document (KIID) for UCITS
The KIID Q&A addresses the following topics:
- Preparation of KIID by UCITS that are no longer marketed to the public or by UCITS in liquidation.
- Communication of KIID to investors
- Treatment of UCITS with share or unit classes
- Past performance
- Clear language
- Identification of the UCITS
The question which was added to the bank of Q&A relates to the ‘Past Performance’ section of the KIID. It confirmed that where a receiving UCITS is a newly established UCITS with no performance history, the KIID of the receiving-UCITS should include the past performance of the merging UCITS if the competent authority of the receiving UCITS reasonably assesses that the merger does not impact the UCITS’ performance. ESMA expects the performance of the UCITS to be impacted if (for example) there is a change to the investment policy or to the entities involved in the investment management. It should also be made clear in the KIID of the receiving UCITS that the performance is that of the merging UCITS.
Questions and Answers – Application of the AIFMD
The additional questions added to the bank of Q&A address the following topics:
1. Reporting to national competent authorities under Articles 3, 24 and 42
Question 37 - According to Article 110 of the implementing Regulation, AIFMs shall take into account all the EU AIFs they manage and AIFs they market in the Union to calculate the reporting frequency. The AIFM should therefore calculate a unique reporting frequency taking into account all the AIFs it markets in the Union and apply the same reporting frequency to all Member States where it markets its AIFs.
Similarly, the assets under management in questions 33 and 34 of the consolidated reporting template for AIFM-specific information should be based on all the AIFs marketed in the Union by a non-EU AIFM and not on the AIFs marketed by a non-EU AIFM in a particular Member State. This means that non-EU AIFMs should report the same amount of assets under management to all NCAs to which they report under Article 42 of the AIFMD.
Question 54: When reporting information on the total long and short value of exposures before currency hedging (questions 128 to 130 of the consolidated reporting template), AIFMs should report information on long and short value of exposures for all the sub-asset types of questions 122 to 124 of the consolidated reporting template. The information should be provided in the base currency of the AIF. This means that the sum of the short and long value of exposures in questions 129 and 130 should equal the sum of the questions 122 to 124.
Question 55: Non-EU AIFMs marketing their AIFs in the Union under Article 42 of the AIFMD should report the results of stress tests under Articles 15 and 16 of the AIFMD (questions 279 and 280 of the consolidated reporting template) insofar as this is required by the national private placement regime of the Member State where they market their AIFs or if the non-EU AIFMs have carried out such stress tests.
2. Notification of AIFMs
Question 3: An AIFM should not undertake a new notification under Article 33(2) of the AIFMD every time it wishes to manage a new AIF established in a given Member State. The original Article 33(2) notification should be considered valid for all the AIFs it intends to manage in that given Member State. In such cases, an update in accordance with Article 33(6) should be sent to identify each new AIF to be managed under the original Article 33(2) notification. When the proposed new AIFs are of a different type from the ones specified in the original Article 33(2) notification, the AIFM should clarify this in the update submitted under Article 33(6).
3. Calculation of leverage
Question 4: When calculating the exposure of an AIF in accordance with the gross method under Article 7(a) of the implementing Regulation, AIFMs should exclude the value of all cash held in the base currency of the AIF (The exclusion of cash held in the base currency of the AIF applies to cash and also to cash equivalents that meet the requirements of Article 7(a) of the implementing Regulation).
4. Additional own funds
Question 1: AIFMs should exclude investments by AIFs in other AIFs they manage for the calculation of additional own funds under Article 9(3) of the AIFMD.
Question 2: AIFMs should NOT exclude investments by AIFs in other AIFs they manage for the calculation of additional own funds to cover potential liability risks arising from professional negligence under Article 9(7) of the AIFMD, because investments in other AIFs managed by the same AIFM increase the operational risk.
According to Article 36(1) of the AIFMD, Member States may allow an authorised EU AIFM to market to professional investors, in their territory only, units or shares of EU feeder AIFs which have a non-EU master AIF managed by a non-EU AIFM provided that the EU AIFM managing the EU feeder AIF fulfils certain conditions as set out in Article 36(1) (a) to (c).
According to Article 36(2) of the AIFMD, Member States may impose stricter rules on the AIFM in respect of the application of Article 36 of the AIFMD. Therefore, whether the non-EU AIFM managing the non-EU master AIFs has to be authorised under the AIFMD depends on the national law of the Member State transposing Article 36 of the AIFMD.