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A practical guide to the UCITS KIIDs annual update

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A practical guide to the UCITS KIIDs annual update 1

By  Ulf Herbig at Kneip

We take a practical look at the UCITS KIID

What is a UCITS KIID and what is it used for?

The Key Investor Information Document (KIID) is a 2- or 3-page summary document detailing a fund’s charges, risk & reward profile, past performance and the overall objectives and investment policy.

What does the regulation say about the annual update?

In terms of annual updates, according to EU Regulation 583/2010, Fund Managers have 35 business days (excluding weekends) from December 31 to issue a revised version of the KIIDs including the performance of the calendar year that just ended.

The Regulation says that the documents must not only be produced but also made available to investors before the 35-business-day-delay is elapsed. This means that Fund Managers must compute the past performances for the year 2020, update the documents that are currently made public, in all applicable languages, proceed with filing to regulators and ensure that these documents are published on websites.

When is the deadline this year?

In the absence of any legal holiday in January and February, the deadline is set to 35 business days from January 1st, which leads to Friday 19 February 2021.

If there is a legal holiday between January 1st and February 19th, then the deadline can be extended accordingly to the next business day. However, we always recommend sticking to the deadline without taking any legal holiday in January or February into account.

What can be challenging with the annual update?

The annual update production cycle can be challenging in many areas:

Scope management. Overall, the scope of the annual update must be the first and foremost task to be done, early in January. The annual update must be done on all share classes for which performances for at least on full calendar year (real or simulated) can be shown. This means that share classes launched in 2020, where the Fund Manager does not want to show simulated performances, may be excluded from the scope of the annual update of 2021. The monitoring of the KIIDs for these share classes launched in 2020 shall continue its normal life but will not be affected by an update of performance as long as there is not a full calendar year of performances to be shown.

Computation of 2020 past performance. this is the main task to be done in relation to the annual update and is a mechanical computation of the net performance of the share class or the fund from 31 Dec 2019 to 31 Dec 2020, with an assumption of the dividends paid during the year being reinvested into the fund.

Consideration of inactivity periods during 2020. When the share class of the fund had one or more periods of inactivity during the year, then the following question is to be considered: Do we, as a manufacturer, show either a) no performance for 2020 in the KIID and provide a written explanation instead, or b) show the 2020 performance in the KIID and simulate the performance during the dormancy period based on a benchmark?

Material changes other than past performance to be incorporated in the KIID. Very often the annual update is also a time where other changes may be incorporated, being driven by changes in the regulation or changes triggered by a modification of the prospectus. We would tend to consider the implementation of these changes at the same time as the KIID annual update production, to make sure the filing to home and host regulators is being done once and for all.

Is this year’s annual update any different?

In terms of document production, the processing remains the same as the previous years, even though the year that just ended may have been tough for many organizations and might have impacted the net performance of the funds.

Should you already start to think about the move from KIID to KID?

As of today, the grandfathering for Asset Managers allowing them to produce and issue a UCITS KIID in lieu of a PRIIPs KID will come to an end on Dec 31, 2021. This means that this year should be the last year of having to handle an annual update of the KIIDs and that a PRIIPs KID will have to be produced from Jan 1, 2022. Therefore, the time to start thinking about the move to the PRIIPs is now.

However, there is currently no approved regulatory technical standards (RTS) available at the level of European Supervisory Authorities, which means that product manufacturers do not have any guidelines as to how to produce the PRIIPs KIDs by Jan 1, 2022. We expect to have draft RTS issued by the ESAs by end of January, with a final version to be ratified by the EU Commission one of two months later, as the earliest.

This means that the implementation timeframe, if the deadline is maintained, will be very limited and will put significant pressure on product manufacturers to get this implementation over the line within deadline.

There is also a possibility that a further extension of the grandfathering period is granted, which would extend the use of the UCITS KIID for a longer period. This, if applied, would be a welcomed relief for market participants in the fund managers who are already under huge regulatory pressure.

Investing

Estate planning for wealthy celebrities or UHNWIs

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Estate planning for wealthy celebrities or UHNWIs 2

By Sean Sheridan, Client Director, ZEDRA Isle of Man

Estate planning often gets pushed aside…sometimes with disastrous knock-on effects for a family. With today’s evolving regulatory environment, future planning can be challenging and often daunting.

Despite inevitable obstacles, there are ways to minimise the burden to enable even celebrities to have future generations enjoying the benefits of their wealth. In this article we explore why estate planning gets overlooked, and why it’s so important to protect prosperity and interests.

It’s easier to put off estate planning than you’d think – even for people like celebrities or UHNWIs who have earned significant wealth. For example, it’s thought that the great Diego Maradona passed away without leaving a Will or other plans for his assets, despite recent years of ill health. There were already reports of a contested estate just weeks after his funeral. Michael Jackson, Prince, James Gandolfini and Philip Seymore Hoffmann all passed away with various issues with their estates, despite having amassed fortunes.

It’s not disorganisation or a lack of desire that stops people planning their estate. In fact, often the last thing people want is to leave family or loved ones having to deal with probate and complex legal affairs at an already difficult time. Many people simply put off estate planning, thinking they will have time later…whenever that is. Alternatively, they may not comprehend how challenging it can be to untangle an intricate estate, and what legal rules there are that surround how an estate will automatically be divided amongst heirs and spouses if forced heirship laws apply. Equally, many people may not know that some loved ones may not get any assets or be looked after if provisions aren’t made in advance.

Privacy

For UHNWI a properly planned estate can also mean more privacy for family at a challenging time. Many HNWI will choose – along with advisors – a structure that will allow for maximum confidentiality and will keep the details of the estate and any beneficiaries private. Information about beneficiaries of an estate becoming public can also make them a target for press or other unwanted attention. As structures which allow for both discretion and succession planning, trusts can be very popular for this reason.

Beneficiaries

Trusts also allow for settlors to stipulate the conditions under which beneficiaries may have access to or be given money from a trust.

Trusts allow the settlor the ability to lay out one or more conditions. For example, a settlor could put aside assets in trust to support beneficiaries but not make all the assets available to them at once. This might be to support good governance or simply to protect beneficiaries from some of the hazards associated with wealth, as perceived by the settlor.

Practically, this means a settlor and their advisors might look at different conditions for a trust’s assets. For example, beneficiaries might only receive a lump sum every 10 years. Alternatively, they might get a monthly pay-out, similar to a salary. The settlor might wish that funds are paid out to beneficiaries for the sole purpose of paying for their college education or to purchase a property.

Corporate trustees like ZEDRA ensure that the settlor’s wishes are met, and the assets of the trusts are used in the way the settlor would like and as laid out in the trust deed.

Planning ahead 

Planning ahead with advisors is vital – especially for anyone with a complex assets and interests that span various geographies may be complex in terms of nature, like IP rights.

Expert advice that’s tailored around an individual’s personal situation is a must, so thinking ahead is crucial. It’s never too early to make sure you’re planning your estate and making sure loved ones or important causes will be looked after when you’re gone.

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Dollar edges lower as investors favor higher-risk currencies

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Dollar edges lower as investors favor higher-risk currencies 3

By Stephen Culp

NEW YORK (Reuters) – The dollar lost ground on Friday as market participants favored currencies associated with risk-on sentiment over the safe-haven greenback.

Risk appetite was stoked by better-than-expected economic data and expectations that U.S. President Joe Biden’s proposed $1.9 trillion coronavirus relief package will come to fruition.

“The dollar’s down against other currencies but not by a whole lot,” said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut. “I expect the dollar to be where it is now at the end of the year, and the main reason for that is while I see some signs of improvement in the economy, monetary policy is going to stay where it is.”

“I don’t think the dollar is underpriced or overpriced,” Pursche added.

For the week, the dollar slid about 0.2% against a basket of world currencies, the euro was essentially flat, and the yen lost more than 0.5%. But the British pound advanced more than 1.1% against the dollar, its best week since mid-December.

Bitcoin continues soar to record highs. The world’s largest cryptocurrency was last up 6.6% at $54,961.67, hitting $1 trillion in market capitalization.

Its smaller rival, ethereum, was last up 0.7% at $1,953.28.

The digital currencies have gained about 89% and 1,420%, respectively, year to date, leading some analysts to warn of a speculative bubble.

“One concern I’ve always had (about cryptocurrencies) is how susceptible they are to manipulation,” Pursche said. “But they’re going to continue to gain legitimacy.”

“While it’s great that Tesla made an investment in bitcoin, I’m more intrigued by Blackrock and other major investment firms taking a hard look at cryptocurrencies as a viable investment.”

The Australian dollar, which is closely linked to commodity prices and the outlook for global growth, was last up 1.21% at $0.7863, touching its highest since March 2018.

The New Zealand dollar also gained, closing in on a more than two-year high, and the Canadian dollar advanced as well.

Sterling, which often benefits from increased risk appetite, rose to an almost three-year high amid Britain’s aggressive vaccination program. It had last gained 0.27% to $1.40.

The euro showed little reaction to a slowdown in factory activity indicated by purchasing manager index data, rising 0.21% to $1.2116.

The yen, gained ground against the dollar and was last at 105.495, creeping above its 200-day moving average for the first time in three days.

(Reporting by Stephen Culp, additonal reporting by Tommy Wilkes; editing by Jonathan Oatis)

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Shares rise as cyclical stocks provide support; yields climb

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Shares rise as cyclical stocks provide support; yields climb 4

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – A gauge of global equity markets snapped a 3-day losing streak to edge higher on Friday, as the recent selling pressure on high-flying big technology-related stocks eased even as investors showed a preference for economically sensitive cyclical sectors.

Oil prices fell from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather, while the U.S. Treasury yields extended their recent rise.

The MSCI’s global stock index was up 0.47% at 681.88, after losing ground for three consecutive sessions.

On Wall Street, stocks steadied as cyclical sectors edged higher while tech names made modest advances after concerns about elevated valuations led to some selling in recent sessions.

“What we saw (this week) represents a market that is tired and may not do very much. So we are headed for some sort of a pullback, but I don’t think we’re there just yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“Investors are not really pulling out of the market, but they are becoming more cautious. It already has factored in another good positive earnings season.”

The Dow Jones Industrial Average rose 119.97 points, or 0.38%, to 31,613.31, the S&P 500 gained 12.93 points, or 0.33%, to 3,926.9 and the Nasdaq Composite added 92.58 points, or 0.67%, to 13,957.93.

The S&P 500 technology and communication services sectors, housing high-value growth stocks, were among the smallest gainers in early trading, while financials, industrials, energy and materials rose more than 1%.

European shares edged higher on Friday as an upbeat earnings report from Hermes boosted confidence in a broader economic recovery. The pan-European STOXX 600 index was 0.64% higher.

U.S. Treasury yields on the longer end of the curve rose to new one-year highs on Friday as improved risk appetite boosted Wall Street, while the yield on 30-year inflation-protected securities (TIPS) turned positive for the first time since June.

Core bond yields have pushed higher globally, led by the so-called reflation trade, where investors wager on a pick-up in growth and inflation. Growing momentum for coronavirus vaccine programs and hopes of massive fiscal spending under U.S. President Joe Biden have spurred reflation trades.

The benchmark 10-year yield was last up 5.1 basis points at 1.338%, its highest level since Feb. 26, 2020.

Oil prices retreated from recent highs for a second day on Friday as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, analysts estimated.

Brent crude futures were down 28 cents, or 0.44%, at $63.65 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 66 cents, or 1.09%, to $59.86.

Copper jumped to its highest in more than nine years on Friday and towards a third straight weekly gain as tight supplies and bullish sentiment towards base metals continued after the Chinese New Year.

Spot gold XAU= was down 0.58% at $1,785.71 an ounce.

The dollar lost ground on Friday, extending Thursday’s decline as improved risk appetite sapped demand for the safe-haven currency and drew buyers to riskier, higher-yielding currencies. The dollar index was off 0.295%.

Bitcoin hit yet another record high on Friday, hitting a market capitalization of $1 trillion, blithely shrugging off analyst warnings that it is an “economic side show” and a poor hedge against a fall in stock prices.

(Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski)

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