The European Union must improve the template for its key investor information document, which will replace simplified Ucits fund prospectuses in the middle of next year, the IMA has said.
The IMA says it supports the idea of an EU-wide template, but adds authorities should change the documents’ risk ratings, their retention of performance history on merged funds and their “small-print format”.
Research by the IMA and the Association of British Insurers has indicated 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 points out 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 adds the document as it stands is also so short—two sides of A4 paper—that firms will be forced to display key information in small print, making investors less likely to read it.
The IMA has just submitted its final response on the document to the Committee of European Securities Regulators’ consultation papers.