Thematic review of UK KIDs

The FCA has requested feedback on proposed changes to the UK PRIIPS KIDS regulation to a new CCI KIDs regime.

Before responding to the FCA consultation we conducted a thematic review on current KID disclosures.

Our thematic review has identified that any changes to regulations must address:

  • An economic principle called “a market for lemons”, applying this principle may contribute to improving discount rates in the UK investment trust market.
  • We have also identified a need to report on net returns, and fees from manufacturers consistently. We submit that the presentation of performance scenarios (Good, Moderate, Poor & Stressed) setting out clearly net returns, fees, and contributions to performance for each scenario is a logical way to proceed and will consistently join together the distribution chain.
  • Where platforms take fees, it should be from the manager’s net returns in each scenario, to avoid misleading investors by double counting the managers fees.
Download the Thematic review of UK KIDs
Download - Thematic review of UK KIDs

Myth from manufacturers: Costs are reflected in the share price; therefore, we don’t have to show costs in our KID.

Myth: Platforms are double counting costs.

Myth: Investment trust companies should be treated like ordinary listed companies with no onerous cost disclosures.

Myth: No one reads KIDs, so we shouldn’t bother with them.

Myth: Disclosures hurts discount rates and current wide discount rates are only down to economic conditions.

Myth: Removing costs from my KID will give me a competitive advantage in the market place.

Myth: The new CCI regime will improve the risk rating of funds.

Myth: Not saying anything in my KID will make it good.