UCITS IV: Synthetic risk & reward indicator

In the context of UCITS IV, the Simplified Prospectus is replaced by the Key Investor Information Document (KIID) of which the so-called Synthetic Risk and Reward Indicator (SRRI) is one component.

In order to improve the comparability between different funds from all over the European Union, the SRRI illustrates a fund’s Risk and Reward profile through an integer number between 1 and 7. The European Securities and Markets Authority provided detailed guidelines for the calculation of the SRRI (CESR/10-673).

ESMA’s methodology to calculate this indicator depends on a range of criteria like the investment policy, the availability of historical data and the complexity of the underlying instruments.

Thus, the processes that need to be established to calculate SRRI in line with the regulatory requirements are demanding in terms of data requirements, methodological questions and governance aspects.

Given the simplicity of its appearance to investors, the SRRI definitely bears important implications: The SRRI will be published and available for everyone. It will be subject to benchmarking with competitors and will be actively looked at during the investment decision phase.

In order to help our clients mitigate potential reputational and legal risks, Deloitte has developed an outsourcing solution for the calculation and monitoring of the SRRI.
 

Our services

Our assistance covers all the following aspects:

1. Knowledge transfer
2. Review of procedures
3. Gap analysis
4. Writing of procedures
5. SRRI Production

We especially emphasise our outsourcing service for the SRRI calculation, in order to comply with UCITS IV requirements.

This outsourcing service combines our proven expertise in risk management and the ensured accuracy of sophisticated methodologies.

Of course, our assistance will be tailored to your specific needs. We offer production and monitoring of the SRRI for all UCITS categories.

Our outsourcing solution ensures:

• Compliance with CSSF 11/512 Circular
• Proper mitigation of reputational risk

We especially emphasise:

• Systematic completion of time-series
• Mapping on risk factors
• Re-pricing of derivatives / complex structures