Industry hopes experience counts as it awaits the second KIID, says KNEIP’s Mario Mantrisi

Mario Mantrisi, chief Strategy and Research officer at KNEIP, says that there are lessons learned implementing the Key Investor Information Documents (KIIDs) that should help with the next steps in documentation production facing the industry.

It is nearly a year since asset managers were required to produce their first Key Investor Information Documents, or KIIDs, for their Ucits funds. The successful implementation of the document has set the standard for industry reporting and the European Commission has announced plans for it to be extended to packaged retail investment products in 2015. There are also initiatives from the European Union and the European Commission to introduce similar, KIID-style documents for other investment product ranges, including offshore alternatives. In this ever-changing regulatory environment, and in light of Ucits costs spiralling of control, the need for managers to refine and improve the efficiency of KIID production processes is becoming increasingly important.

There is much the industry could learn from managers’ experience of the Ucits KIID. To this end, KNEIP has worked with over 100 asset managers and administrators to draw on their collective experience, ascertain what challenges they faced during the production and dissemination of their KIIDs in 2012, and establish how best to overcome them.

One of the key challenges that managers have referred to time and again relates to managing KIID production workflows around their core business functions. KIID production is an additional burden to asset managers that diverts attention away from their principle raison d’etre: generating returns for their investors. Many managers under-estimated the time pressures involved in aggregating data, developing content and translating material, and found themselves resource constrained when it came to the physical production process. As managers are required to update their KIIDs at least once per year, many have taken the decision to seek external support and automate this latter part of the process in anticipation of future production runs.

Time constraints are also an issue for managers that have multiple funds that require KIIDs. KIID production software can be a great time saver, as it can automatically replicate relevant information across documents for an entire fund range. This content can then be added to, or tailored for, individual funds where necessary. Of course, managers must correctly configure the software at the start of the production process, as making changes during production can result in unnecessary time costs, but it can be adjusted and refined for any subsequent runs.

The advantage of having an adjustable production infrastructure is that it enables managers to revise KIIDs with ease. One of the key lessons learned from the initial rounds of KIID production is that revisions are often necessary and must be planned for. For instance, the KIID must be adapted when there are changes to the underlying funds’ prospectuses, fund rules, or synthetic risk and reward indicators to name a few. It is also useful to have this capability in case regulators introduce prescriptive changes to the format of the document itself. Having a flexible production infrastructure is also a key advantage for fund managers operating across multiple asset classes, as the process can be adapted more easily to meet the disclosure requirements of other regulations such as the Alternative Investment Fund Management Directive (AIFMD).

At present it has not been specified in the AIFMD how managers should go about disclosing fund information to investors. Some have considered disclosing through their ordinary prospectus, but there is a compelling argument for using existing KIID production infrastructure, as it enhances managers’ flexibility to keep investors abreast of changes to underlying funds. It remains to be seen how investors might respond to such a document, but the success of the Ucits KIID suggests that this could be the approach that regulators and policymakers encourage in future.

Ultimately, the takeaway for both AIF managers considering a KIID-style disclosure document and Ucits managers preparing for their second production runs should be the same. The process requires more time and resources than is generally expected, so managing workflows around deadlines; streamlining translation processes; refining software solutions and seeking external support can all help managers avoid undue stress.

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