ALFI responds to ESMA consultation on UCITS performance fee guidelines

According to ESMA, its draft guidelines aim to harmonise the way in which performance fees can be charged to the UCITS and its investors while ensuring common standards of disclosure, as current practices vary among EU Member States. ESMA’s draft guidelines propose common criteria to promote supervisory convergence in the following areas:

 general principles on performance fee calculation methods;
 consistency between the performance fee model and the fund’s investment objectives, strategy and policy;
 frequency for the performance fee crystallisation and payment;
 the circumstances where a performance fee should be payable; and
 disclosure of the performance fee model.

ALFI agrees that it would be good to have high-level principles or guidelines on performance fees in UCITS across the European Union. Greater standardisation helps to provide clarity for both asset managers and investors. Different national requirements create barriers to the cross-border distribution of funds and contravene the legal requirement to make every effort to comply with guidelines adopted by the European Supervisory Authorities. While working on a market standard, ESMA should in ALFI’s view not be too prescriptive, which would correspond to the principle-based approach chosen by IOSCO. Given that UCITS are set up by initiators from various geographical and other backgrounds, and that they are distributed globally, it would not be appropriate to require only one model or methodology.

Read ALFI's response.