UCITS made available to retail investors in the EU need to provide a Packaged Retail Insurance-Based Investment Products Key Information Document (PRIIPs KID) as of January 1, 2023. This requirement previously applied only to Alternative Investment Funds however, the exemption for UCITS shall be removed by end of year 2022.
A PRIIPs KID is a short pre-sale disclosure aimed at providing retail investors with the information necessary to make an informed investment decision. The Packaged Retail Investment and Insurance Products (PRIIPs) regulation requires a Key Investor Document (KID) when financial products are sold to retail investors with the aim of providing information which is essential and standardised.
This regulation intends to aid retail investors to assess and compare products by having the appropriate information across different types of PRIIPs, irrespective of the particular market circumstances. As per the Commission Delegated Regulation (EU) 2021/2268 amending Delegated Regulation (EU) 2017/653, the PRIIPs KID should contain:
- CLEAR DESCRIPTION outlining salient features of the fund.
- KEY INFORMATION of investment products in a standardised format.
- RISKS IDENTIFIED and explained in a consistent manner.
- UNDERSTANDABLE INFORMATION in relation to performance which is not misleading..
- COSTS INFORMATION so that retail investors may compare and better understand the different types of cost structures of different PRIIPs.
While the PRIIPs KIID is similar to the UCITS KIID, there are additional disclosures which need to be addressed, relating to performance data, costs and charges. Apart from past performance, UCITS now must also include forward looking projected returns based on historic performance. These shall be classified as either a stress scenario, an unfavourable scenario, a moderate scenario or a favourable scenario. Meanwhile, with respect to costs and charges, additional information is required which is currently not factored into the UCITS KIID charge disclosure.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.