Most KIIDs fail to achieve aims, study claims

Asset managers could be failing to match regulators’ expectations and may risk liability when producing Key Investor Information Documents (KIIDs), new research suggests.

A joint study by asset management service provider KNEIP and financial communication specialist Ebsylon examined a random sample of 100 KIIDs in English, French, German and Italian from 29 fund managers.

The research determined that, while the content of the documents was “generally good”, the majority of the samples were in need of further work to ensure their form and presentation complies with KIID Regulations.

According to the study, 56% of the KIIDs examined misrepresented the past performance bar chart. Examples of errors include not rounding performance figures to one decimal place and displaying performance for incomplete years.

Some 54% of the documents contained errors in their charges table, such as failing to mention the narrative explanation of entry/exit charges or showing switch charges. In addition, 54% misrepresented the KIID disclaimer of authorisation details.

The study showed some KIIDS contain inconsistencies, such as suggesting differing asset allocation guidelines in the objectives and investment policy section and the risk/reward section. An “overwhelming majority” also made use of jargon or technical terms, despite the need to avoid them.

Mario Mantrisi, the head of product management and innovation at KNEIP, says: “While these findings may at first view seem somewhat pedantic, regulations are quite clear in their specifications and leave little room for interpretation of prescribed statements or formatting of various elements.

“The result is that fund managers distributing KIIDs cannot be assured that the KIIDs would pass the scrutiny of regulators, if checked. This risk is increased by exposure to potential complaints from investors and the possibility of liability.”

To receive more relevant articles like this one, why not sign up to our briefings and breaking alerts by clicking here.