Friday July 16 2021

News Source: Fund Regulation

Focus: UCITS

Type: General

Country: European Union

On 16th July 2021, ESMA published updated UCITS Questions and Answers. The following new questions have been added:

Question 5: Application of the guidelines to funds with multiple portfolio managers

Question 5: In case the authorised management company 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 5: 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 management company 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 6: Crystallisation of performance fees in case of the creation of a new UCITS/compartment/share class in the course of the financial year

Question 6: In case of creation of a new compartment/share class in an existing UCITS in the course of its financial year or in case of creation of a new UCITS, can performance fees be crystallised after less than 12 months from the date of creation of such a new UCITS/compartment/share class?

Answer 6: No. Performance fees, if any, should be crystallised after at least 12 months from the creation of a new UCITS/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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