ESMA Consults on UCITS Performance Fees – Key Considerations for Irish UCITS

ESMA published a consultation (the “Consultation”) on draft guidelines for UCITS performance fees (the “Draft Guidelines”) on the 16 July 2019. The objective of the Consultation is to obtain stakeholder feedback on the Guidelines in five principle areas, namely:

1. performance fee calculation methodologies;

2. consistency between performance fee calculation models and investment objectives, strategies and policies;

3. frequency of crystallization;

4. negative performance (loss) recovery; and

5. disclosure of performance fee models in fund documents.

The Draft Guidelines will apply to UCITS in Ireland charging a performance fee.

ESMA is also seeking stakeholder feedback on whether the Draft Guidelines should be extended to apply to AIFs and will consider responses to the Consultation submitted before the deadline of 31 October 2019.

The Consultation is published at a time of increased investor awareness and greater demand for transparency of performance-based fee models and follows a number of reviews conducted by various regulators including IOSCO, ESMA and the Central Bank of Ireland.

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