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PRIIPs KIDs: New reporting challenges for asset managers.

The PRIIPs regulation, which has been in force since January 2018, aims to make “packaged” investment instruments and capital-forming insurance products more comparable and understandable for investors. The regulations pose numerous challenges for fund providers in terms of data management and reporting. For example, two regulations must be observed in parallel – UCITS KIIDs and PRIIPs KIDs – for investment products are distributed via insurance products. PRIIPs KIDs in particular have been severely impacted by new RTS update has already changed a lot.

Enhanced regulatory technical standards from July 2022

The new PRIIPs RTS, applicable from July 2022, aim to provide clearer information to investors. Fund providers must be able to calculate and transmit PRIIPs data according to EPT and CEPT standards. This now includes for all mutual funds:

  • an adjusted cost disclosure including implied transaction cost calculation
  • the provision of PRIIPs KIDs and alignment with own factsheets, MIFID data and ESG reports
  • For the UK, the continued provision of UK UCITS KIIDs.

Accordingly, the following adjustments are to be implemented promptly, subject to the vote of the European Parliament:

  • The calculations of performance scenarios must be extended to include back tests and a history of up to 10 years (for insures up to 25 years) Here, 12 different criteria must be precisely complied with.
  • The return is only to be shown over 2 holding periods.
  • Implied transaction costs can be estimated with market prices according to the Full PRIIPS method or optionally until 2024 using benchmarks in the own broker environment (New PRIIPs method), however, the required 3-year history should be built up with so-called arrival prices already from 1.1.2022.
  • The PRIIPs KIDs will become mandatory for asset managers in Q2 2022 after insurance companies and will replace the UCITS KIIDs.
  • The PRIIPs and MiFID II data are to be harmonised, divergent cost information is to be avoided.

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As if this were not demanding enough, further challenges in regulatory reporting lie ahead.

Information on the sustainability of the funds must also be provided. This will require separate pre-contractual and periodic disclosures according to SFDR input, which are similar to the KIDs and should also be produced and distributed together for distribution.

How can the effort be kept as low as possible?

Due to the high demands on current and future regulatory reporting by asset managers, fund distributors and insurance companies, a central database and an integrated reporting solution are recommended. KIDs and SFDR reports should be created with the same underlying systems. Data calculations should be done centrally and not outsourced to different service providers.

Users and, if necessary, service providers, have access to all data, calculations and processes, depending on the distribution of tasks. This makes calculation methods for performance, risk and costs 100% transparent and flexible.

With our state-of-the art SaaS solution, the acarda platform, asset managers simply load their raw data – e.g. portfolio composition, transactions, fund data and narratives – directly into the systems. All further steps are automated. In addition, comprehensive managed services are offered – up to the complete outsourcing of regulatory reporting.

 

We will be happy to advise you on further details.

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