Q&A - Alfi

Art 7(2)(e)
Q. What type of fund trading strategies are likely to qualify under this article as incurring transaction costs
that have a material effect on investment returns?
A. There is nothing in the EU Regulation 583/2010 or CESR/09/949 (general guidelines on the KID) or CESR/10-674
(guidelines on the calculation of ongoing charges) to inform an answer to this question. Practitioners may wish to
consider making such a disclosure for UCITS that employ quantitative strategies, which involve a higher volume of
securities trading than might be expected for other forms of active management. They similarly may wish to consider
making such a disclosure for UCITS that invest substantially in markets where securities transaction charges are
relatively expensive. We do not think that it is necessary under this article to take account of transaction costs that
arise because of shareholder capital activity.
Q. What words could be used to satisfy the provisions of Art 7(2)(e), "where the impact of portfolio transaction
costs on returns is likely to be material due to the strategy adopted by the UCITS, a statement that this is the
case, making it also clear that portfolio transaction costs are paid from the assets of the fund in addition to
the charges set out in Section 3 of this Chapter"?
A. We think that the following text would be suitable: "The portfolio transaction costs of this fund's investment strategy
are a material component of its performance. Portfolio transaction costs are paid from the assets of the fund. They are
additional to the charges set out in the Charges section."
With respect to the related statement on the performance chart (Arts 15(5) and 15(5)(b), "The bar chart layout shall be
supplemented by statements which appear prominently and which … indicate briefly which charges and fees have
been included or excluded from the calculation of past performance."), we think that the following text would be
suitable: "The chart shows the fund's performance after all charges, including portfolio transaction costs, have been
paid."
Art 7(2)(f)
Q. Information on the minimum recommended term for holding units in the fund seems to belong more to the
section Risk & Reward than to the section Objectives and Investment Policy. Can I move it to the section Risk
& Reward?
A. No. You must put information in the sections strictly in accordance with the EU Regulation 583/2010. This is
intended to ensure the comparability of KIDs issued by different promoters.
Chapter 3, Content of Sections of the Key Investor Information Document
Section 2, Risk and Reward Profile
Art 8
Q. The SRRI between share classes may not be the same. This can typically be the case for unhedged
currency share classes. If a UCITS decides to use multiple share classes in one KID, is the following example
acceptable?
Lower risk
Higher risk
Share Class A – Cap. (LUxxxxxxxxxx)
Share Class B – Dis. (LUxxxxxxxxxx)
Potentially lower reward
Potentially higher reward
1 2 3 4 5 6 7
Share Class C – Cap. (LUxxxxxxxxxx) 1 2 3 4 5 6 7
A. Yes, provided that the practitioner takes care to ensure that the resulting document is "clear and not misleading"
(Art 26(3) and Recital 13).
Q. When a representative share class is used, can the same example be used by referencing the
representative share class in the left box?
A. No. This question implies that there will be more than one representative share class on a KID or that a
representative share class KID will be combined with a multiple-share class KID. There may only be one
representative share class on a KID. We do not think that will be permitted to combine the concept of a representative
ALFI KID Q&A, Issue 1112, 19 December 201116 February 2012 Page 14