Fri, Apr 3, 2020

ESMA Publishes Guidance on Performance Fees in UCITS and Certain AIFs

The European Securities and Markets Authority (ESMA) published its final guidance on performance fees in investment funds, applicable to UCITS and certain types of AIFs. The guidelines provide comprehensive guidance to fund managers when designing performance fee models for the funds they manage, including the assessment of the consistency between the performance fee model and the fund’s investment objective, policy and strategy, particularly when the fund is managed in reference to a benchmark.

ESMA’s guidelines aim to harmonise how National Competent Authorities (NCAs) supervise performance fee models and disclosure by providing guidance on:

  • the way fund managers should charge performance fees to retail investors; and
  • the circumstances in which performance fees can be paid.

This is an integral part of ESMA’s broader efforts to ensure greater supervisory convergence on the cost of retail investment products.

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