40% of funds may need to re-issue KIIDs

15 June 2020

Four in ten funds may need to reissue their investor documents imminently as the Covid-19 pandemic continues to cause volatility in the financial markets.

Fund data group FE fundinfo has warned that up to 40% of UCITs funds will need to update and reissue their key investor information documents (KIIDs) if the synthetic risk and reward indicator (SRRI) is different from the published one for 16 consecutive weeks.

A KIID is a two-page document detailing critical information about a fund, designed to help investors understand the nature and key risks of the fund. It replaced the Simplified Prospectus in 2012.

According to FE fundinfo, nearly 1,200 UCITs share classes had demonstrated at least 10 successive weeks of change by the beginning of June, with more than 700 of these set to approach the 16-week deadline within three weeks.

Mikkel Bates, head of regulations, FE fundinfo, said: “Since the introduction of UCITS KIIDs eight years ago, the Covid-19 pandemic is presenting the first real test where the markets are experiencing sustained periods of volatility and this is causing a lot of regulatory and compliance issues amongst fund groups. It is also a huge test for those service providers in the KIID space who monitor the data underlying these documents to ensure they remain compliant.

“With so many share classes approaching the 16-week cut-off point, it will be interesting to see how these service providers respond to the challenge. As with any service which has not been effectively tested, there may be some bumps in the road ahead and some unforeseen challenges. Many providers may have to re-evaluate and adapt their offerings.”

Professional Paraplanner