EUROPE: ESMA Updates AIFMD FAQs

Friday July 16 2021

On 16^th July 2021, ESMA published updated AIFMD Questions and Answers. Section XV on ESMA’s guidelines on performance fees in UCITS and certain types of AIFs has been updated with the following new questions:

Question 7: In case the authorised AIFM has delegated the portfolio management function to different delegated portfolio managers, would it be admissible to pay a performance fee to those delegated portfolio managers who have overperformed during the performance reference period, despite a global underperformance of the fund during the same performance reference period?

Answer 7: No. Based on paragraph 37 of the guidelines, performance fees:

• should be paid only where positive performance has been accrued during the performance reference period;
• could be paid in case the fund has overperformed the reference benchmark but had a negative performance.

The above also applies in case of delegation by the authorised AIFM to different delegated portfolio managers. Therefore, in case of a global underperformance of the fund, performance fees should not be paid to those delegated portfolio managers who have overperformed.

Question 8: In case of creation of a new compartment/share class in an existing AIF in the course of its financial year or in case of creation of a new AIF, can performance fees be crystallised after less than 12 months from the date of creation of such a new AIF/compartment/share class?

Answer 8: No. Performance fees, if any, should be crystallised after at least 12 months from the creation of a new AIF/compartment/share class. Moreover, paragraph 35 of the guidelines foresees that the crystallisation date should be the same for all share classes of a fund that levies a performance fee.

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