EUROPEAN UNION: ESMA Clarify Benchmark Disclosure Obligations for UCITS

Monday April 1 2019

On 29^th March 2019, the European Securities and Markets Authority (ESMA) updated its Questions and Answers (Q&As) regarding the application of the Undertakings in Collective Investments in Transferable Securities (UCITS) Directive.

The updated Q&As clarify the UCITS KIID benchmark and past performance obligations, namely that:

Benchmark disclosure

1. UCITS should clearly indicate, in the KIID, whether their strategy is ‘active’ (or ‘actively managed’) or ‘passive’ (or ‘passively managed’);
2. A UCITS managed in reference to a benchmark is one where the benchmark plays a role in the management of the UCITS, for example, in the explicit or implicit definition of its portfolio composition and/or performance objectives and measures (this clarification led to repeal of an existing Q&A on past performance); and
3. Investors should be provided with an indication of how actively managed the UCITS is, compared to its reference benchmark index.

Past performance

1. Where funds name a target in their investment objectives and policies, the performance should be disclosed against the target, even if the comparator is not named a ‘benchmark’
2. The performance disclosed in the KIID regarding a benchmark index should be consistent with performance disclosure in other investor communications.

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