Fund providers are urging policymakers to require them to provide past performance information in investor documents rather than future scenarios.
The measure is the latest move in the ongoing argument of how performance data should be presented in ‘key investors documents’ – or ‘KIDs’ -under the ‘Pripps’ rules.
Future performance scenarios have been controversially written into proposals and diverge from the standard equivalent documents – known as ‘KIIDs’ – under Ucits regulation, where past performance numbers are the norm.
More than 75% of fund groups would prefer to publish past performance figures, and 41% said they would prefer to replace future performance scenarios completely, according to research by FE fundinfo.
There are nine months to go until Ucits management companies have to fully comply with the Priips –Packaged Retail Investment and Insurance-backed Products – requirements.
The future performance scenarios have drawn criticism from fund groups and campaigning organisations for being hard to understand and potentially misleading. FE fundinfo said just 5% of fund groups support the inclusion of future scenarios on their own.
The findings are in a report – ‘Preparing for Priipss’ – and Mikkel Bates, regulations manager at the firm, said: “Despite reluctance among several prominent MEPs for its inclusion [arguing that past performance is an unreliable indicator of future results], fund groups are clearly in favour of including a fund’s past performance within a Priips KID. That they are due to replace Ucits KIIDs, which fund groups, advisers and investors have all become used to since their introduction in 2012, is only part of the issue.”
There is a growing strength of feeling, Bates added, that future performance scenarios are difficult for investors to grasp.
“Given they are constructed to include different time frames and economic conditions, it is not surprising, especially in the context of the market volatility in the past year.”
FE fundinfo’s research also found “many” fund groups remain unprepared to meet the December 31, 2021, deadline. One in eight fund groups said they will not meet the deadline. Disagreements at policy level (cited by 25% of fund groups) and problems relating to producing and gathering the necessary data required (cited by 23%), were among the problems.
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