The Investment Management Association is calling on the European Union to improve its key investor information document template, which will replace simplified Ucits fund prospectuses next year.
The IMA says it supports the idea of an EU-wide template but adds authorities should change the documents’ risk ratings, performance history on merged funds and “small-print format”.
Research by the IMA and the Association of British Insurers has indicated that the document would assign the same risk-rating to half of UK-authorised funds, undermining investors’ ability to distinguish between different portfolios.
IMA director of authorised funds and tax Julie Patterson says the documents instruct companies to display the track record of the remaining portfolio if two funds merge, meaning companies will structure mergers with a bias towards past performance.
She says a two-sided A4 document is so short that firms will be forced to display key information in small print, making investors less likely to read it.
The IMA has submitted its final response to the Committee of European Securities Regulators.