In November 2020, the European Securities and Markets Authority (“ESMA”) published its guidelines on performance fees applicable to UCITS and certain types of AIFs (the “Guidelines”). The Guidelines aim to promote greater convergence and standardisation in the field of performance fees. In particular, they aim to ensure that performance fee models used by Investment Fund Managers (“IFM”) comply with the principles of acting honestly and fairly in conducting their business activities and acting with due skill, care and diligence, in the best interest of the fund that they manage, in such a way as to prevent undue costs being charged to the fund and its investors. The Guidelines finally aim at establishing a common standard in relation to the disclosure of performance fee models to investors, as they should be adequately informed about the existence of performance fees and about their potential impact on the investment return.
The CSSF issued Circular CSSF 20/764 on 18 December 2020 and integrated the Guidelines into its administrative practices and regulatory approach with a view to promoting supervisory convergence in this field at European level as of 6 January 2021, the date of application of the Guidelines. The CSSF would like to emphasise that proper disclosures to investors of performance fee models in compliance with the Guidelines are mandatory.
Aiming at ensuring compliance with the Guidelines on proper disclosures and collecting standardised key information in relation to performance fees, IFMs are requested for Luxembourg based UCITS or AIFs they manage to complete a dedicated questionnaire on performance fees via the launch of a new eDesk module on performance fees as from 30 September 2021.
The list of funds and sub-funds concerned by the declaration and data collection is provided in the performance fee dashboard of the eDesk module on performance fee:
- as from 30 September 2021, all funds whose financial year is ending between July 2021 and December 2021 will be available in the performance fee dashboard and IFM shall transmit the performance fee declaration and the confirmation of compliance with the Guidelines.
- as from January 2022, the performance fee declaration and the confirmation of compliance will be requested for the funds whose financial year is ending between January 2022 and June 2022.
The deadline for submission of the initial declaration will be at the latest before the corresponding closing date of each fund as further specified in the IFM corresponding performance fee eDesk dashboard[1].
For the avoidance of doubt,
- funds and sub-funds that are not subject to a performance fee must be declared as such accordingly;
- funds that have not yet been launched since having been approved by the CSSF or that became inactive following the full redemption of their shares or units (and then await reactivation) shall also be declared.
After the initial declaration and in case of changes (such as for example introduction of a performance fee for the first time after that date or changes in performance fee models), the IFM will also be responsible to ensure that performance fee declarations shall be kept up to date. A specific update function will be made available shortly under the new eDesk module to send electronically any such changes in parallel to the transmission of the modified prospectus/issuing document.
The Performance Fee Questionnaire as well as subsequent updates must be completed and submitted by an eDesk user linked to the IFM.
An eDesk user guide dedicated to this questionnaire will be available in eDesk to provide additional assistance to complete the questionnaire.
All information related to the creation of user account(s) is detailed in the lower section of the eDesk portal homepage (https://edesk.apps.cssf.lu).
[1] For the funds with a financial year ending between July and September 2021, for which the Guidelines already apply, the deadline for submission of the initial declarations will be 30 November 2021.