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KIIDs/KIDs Service

Key Investor Information Documents (KIIDs) became a necessity in July 2011 within the updates to regulations governing UCITs funds. The solution that asset managers put in place to meet the challenge of producing them may now be out of date - certainly the range of services offered by third parties has developed. If you as the asset manager have a contract with your current external provider, now is a good time to review the market alternatives. In March 2016 European Securities and Markets Association (esma) finalised an update to how the KIIDs will be issued within the Packaged Retail Investment Schemes (PRIPs) regulation that is applicable for all funds from December 2016. UCITs funds have a 3-year exemption so the new regulations do not impact until end of 2019.

Background

Key Investor Information Documents (KIIDs) are a regulatory requirement to provide investors with key information about a UCITS fund. The PRIPs version loses the Investor reference being just Key Information Documents (KIDs). A retail investor cannot invest in a fund until either a KIID or from next year a KID is in place. As such, they are a necessity for an asset manager adding no competitive advantage other than protecting them against regulatory and reputational risk if they are not correct or not updated on time. As such, they are an overhead cost to the asset manager, some of which can be charged to the fund but the rest of which impacts the asset manager's cost base. Back in 2011, when KIIDs were introduced, asset managers were in a rush to comply with the regulations and were entering new territory. Certainly the choice of external suppliers was limited. It was a case of 'let's just get it done asap' with a view to streamlining the process later. The new requirements allow a period of assessment for choosing a longer term solution across all funds captured by the regulations. A review of the market against the PRIPs requirements will future proof the model for when UCITs funds are no longer exempt

Diagram of stages

The Issues

In 2011, what seemed a simple process proved much more difficult in practice. High volumes of KIIDs needed to be produced, both in English and in all other languages where the funds were marketed. An internal resource constraint emerged at production time, as KIIDs have to be updated annually within 35 business days of a calendar year end and this over-lapped with the existing fact sheet and client reporting timelines. Tactically, some companies outsourced these issues as much as possible as a necessity and the suppliers knew this! With little competition and the associated regulatory risk, costs were high. Others retained the operation in-house, but with the increased volumes, for firstly PRIPs and then all funds, now is the right time for a review. The PRIPs regulation also has a review stage at the end of 2018 that may increase scope for Pension Products and the funds currently within AIFMD to both need to have KIDs.

Market View

The solutions have matured, but the new PRIPs requirements for greater cost transparency including transaction charges and risk values are a further challenge. Those that chose not to outsource will have developed their operations, but good data management is critical to ensure all figures are based on the consistent source of data. For those that did outsource, there are now a wider variety of external parties that can offer KIID production services. This has increased competition and driven down costs making it more viable to move to one of these firms. Importantly, some offer an end to end service, so once the data is supplied they can collate, create and disseminate the data. Most offer a modular service so that the asset manager can 'pick and choose' which part is beneficial to them. For example, from calculating the SRRI from NAV data supplied direct from the administrator and monitoring it weekly, right through to lodging the KIID with the regulator and updating various platforms and the asset manager's own website. These suppliers are well suited to add the new PRIPs requirements to enable KID production at a competitive rate.

How Can ISC Help?

ISC have experience in rationalising KIID production and a deep understanding of the suppliers and the operating model that supports the production of KIIDs. We have completed reviews, selected replacement suppliers and then implemented the change. The risk requirements are similar to those needed for AIFMD Annex IV reporting. ISC have experience implementing Annex IV reporting for both European and Non-European AIFMs.

Cost vs efficiency graph

Whether choosing an in-house solution or external provider, ISC has:

  • Unparalleled knowledge of how asset managers operate
  • An informed understanding of market best practice
  • An assessment of the current process of KIID/KID production
  • Provision of informed recommendations to improve efficiency and reduce cost
  • Selection of the most appropriate operating model / supplier
  • Delivery of efficient client-focused implementation

The production of KIIDs/KIDs can be rationalised and improved. Suppliers have improved services providing opportunities to make efficiency and cost savings.

If you would like to speak to ISC, share in our experiences, improve the production of KIIDs/KIDs and lower costs, then please contact us using the details below.

ISC KIIDs and KIDs Service