When two “I”s are better than one?


I like to leave the writing of this article to the last minute, a little bit like the Kim-Trump summit and Brexit negotiations, as Financial Services can move and shift day on day.

On 12th June Andrew Bailey, CEO of the FCA, announced that the regulator will be acting to address the unintended consequences of PRIIPS and MiFID II through a report due as early as July 2018, exploring the scale of the potential problems.

The specific MiFID II impact under review is the unbundling of research from other brokerage services. However, I suggest the real music to the ears of the delegates attending the Asset Management Conference 2018 is the review of the PRIIPs requirement to provide a Key Information Document (KID), replacing the Key Investor Information Document (KIID). Hence the title of this article – KIDs with one I as apposed to the KIID with two I’s!!

New style KIDs have received much criticism due to the controversial requirement to provide predictions of future performance as well as estimates of transaction costs.

Let us just be clear on PRIIPs – Packaged Retail and Insurance-based Investment Products are defined by the regulators as “an investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets that are not directly purchased by the retail investor; or an insurance-based investment product which offers a maturity or surrender value that is wholly or partially exposed, directly or indirectly, to market fluctuations.” Key information document’s (KID’s) need to be produced and provided to retail investors ahead of investment.

New style KIDs have received much criticism due to the controversial requirement to provide predictions of future performance as well as estimates of transaction costs.

To better understand the issue which in some cases is leading to documents being produced with negative cost estimations, which industry commentators and practitioners alike are denouncing as misleading and not helpful to investors, we need to compare KIIDs with KIDs. See the comparison in the table below using the most common KIID used by Asset Managers, a UCITS KIID;


Two pages A4
Three pages A4
Objectives and Investment Policy
Underlying financial instruments
Industrial sector, geographic or other particular targets
Whether UCITS allows for discretionary choices by the manager and relevant benchmarks, if applicable
Whether income is distributed or reinvested
Statement that investors can redeem units on demand and the frequency of such redemption
Minimum recommended holding term (if relevant)
Impact of portfolio transaction costs (if material)
Specific asset management techniques i.e. hedging (if relevant)
Type of PRIIP
Objectives and means for achieving them eg description of underlying investment assets (or reference values) and relevant markets
Relationship between return and underlying investment assets (or reference values)
Type of intended retail investor
Term of product (if relevant)
Risk indicator based on market risk
Risk indicator based on market and credit risk
No inclusion of transaction costs
Inclusion of transaction costs
Performance indicator based on past 10 year performance
Forward-looking performance scenarios including unfavourable, moderate and favourable




I haven’t bored you with all the Regulatory Technical Standards (RTS), this gives you enough to spot the problems Asset Managers are having. Whilst UCITS are exempted from the PRIIPs KID until 2019 UCITS managers must be prepared to provide PRIIPs-required information to underlying retail investors who repackage their funds in the meantime.

The FCA’s report and feedback opportunity in July will be much anticipated.


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Julia Kirkland, Head of FSTP Limited FSTP is now part of ZISHI and OSTC Group

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