Fund managers will be forced to present past performance on a discrete annual basis and fees in a to...
Fund managers will be forced to present past performance on a discrete annual basis and fees in a total expense ratio format under a European-wide key features prospectus.
FEFSI, the federation of European fund management trade associations, is close to completing a standardised prospectus for mutual funds which, once adopted, will replace key features documents.
The new prospectus is designed to comply with the Ucits 2 directive passed by the European Commission, which includes the ability for cross-border sales of funds as well as creating a standard for fund information. The Commission asked FEFSI to draw up a model prospectus to form the basis of negotiation between its member bodies.
Under the new prospectus, fund management groups will be forced to present discrete annual performance data going back 10 years in a bar chart graphic and provide a written five and 10-year annualised total return breakdown.
This information will relate solely to the performance of the fund in question. It will not include sector comparisons but will include warnings that past performance is no guide to future returns.
The prospectus also presents charges in the form of total expense ratios rather than a mix of annual management fees, initial charges, commission and exit penalties, as is currently the case. However, this part of the prospectus requires further refining before it is accepted by all FEFSI's member bodies.
Steffan Matthias, secretary general of FEFSI, said he hoped the process of updating the existing model prospectus would be completed within the next two to three months, although he confirmed that in effect very little remained to be completed. Once the final version has been agreed, it will then be adopted into law in each EU member nation.
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