According to a new survey from PricewaterhouseCoopers (PwC) and the European Fund and Asset Management Association (EFAMA) - UCITS IV: Time for change, many of Europe’s leading asset management firms have not yet understood the significance of the Key Information Document (KID), and are ill-prepared for its impact. Although one of the key mandatory changes under UCITS IV is the replacement of the Simplified Prospectus for UCITS with the KID, 58% of respondents have not yet considered the cost implications of the necessary changes to their systems and controls.

Thierry Blondeau, Partner, PricewaterhouseCoopers Luxembourg, said:

“’The KID has far wider reaching implications than asset managers currently realise. It changes the way in which funds are perceived and will potentially leave some asset managers with gaps in their product ranges.

“For those that have not considered the cost and time implications of these changes, this could result in some nasty surprises come July when the European Commission is expected to adopt implementing measures. Managers must start to adapt their operating systems and fast or they risk being caught out.”

Peter De Proft, Director General, European Fund and Asset Management Association, added:

“EFAMA has supported the KID introduction in UCITS IV to deliver improved investor protection and transparency, as well as cost savings for investment managers. Although implementing measures are still to be adopted, we urge the industry to intensify its efforts and resource commitment to be ready on time.”

Some of Europe’s largest cross-border asset management players have also raised concerns over the effectiveness of the KID in the survey.

Thierry Blondeau, Partner, PricewaterhouseCoopers Luxembourg, said:

“Although considered to be a step in the right direction, members of the European asset management industry are concerned about the effectiveness of the KID and its capacity to create a level playing field for European funds under UCITS IV.”

Peter De Proft, Director General, European Fund and Asset Management Association, added:

“We understand industry concerns due to the lack of key implementing measures at EU and national level. However, EFAMA is convinced that the KID will deliver significant improvements over the simplified prospectus and should be the benchmark for investor disclosure documents for competing retail products.”

The KID is intended to be a concise and focused presentation of information for prospective investors in UCITS funds, but 60% of European asset managers surveyed are concerned the level of detail required within the KID may not be sufficient to enable investors to make sound investment decisions.

Furthermore, 30% of respondents felt it was quite or very unlikely that the KID would result in a level playing field, an additional 22% being undecided on whether it will contribute or not to a level playing field.

54% of respondents believe that the KID will provide the investor with a better understanding of a product’s risks and rewards, while only 41% believe that the KID will improve on the transparency of management charges.

Finally, in spite of the UCITS IV Directive text, 50% of respondents are concerned about the possibility of civil liability being applicable to the KID disclosures.