In the latest update of its Q&A on the application of the Benchmark Regulation, ESMA clarifies the concept of "use of a benchmark" by investment funds. In particular, Q&A 5.4. clarifies that ESMA considers that an index is used for the purpose of defining the investment fund's asset allocation only if the investment policy or investment strategy described in the investment fund documentation define constraints on the asset allocation of the investment fund's portfolio in relation to the index. In addition, Q&A 5.5. clarifies that the mere mentioning of indices in the investment fund documentation for performance measurement purposes (without any asset allocation constraint), is not considered as being "the use of a benchmark" within the meaning of the Benchmark Regulation and is therefore out of scope.
The above clarifications reduce the universe of investment funds that are affected by the Benchmark Regulation and therefore the number of investment funds that need to update their documentation to reflect this Regulation.
In addition, four Commission Delegated Regulations supplementing the Benchmark Regulation were published in the Official Journal of the EU on 17 January 2018 and will enter into force on 6 February 2018. Others will follow.
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