Reminder: Investment Fund Managers are invited to declare via the dedicated eDesk application the performance fee models applicable to Luxembourg UCITS or AIF they manage
In the context of the guidelines ESMA34-39-992 on performance fees applicable to UCITS and certain types of AIFs (the “Guidelines”) published by the European Securities and Markets Authority’s (“ESMA”) in November 2020 and the CSSF communication dated 22 September 2021, the CSSF would like to remind Investment Fund Managers (“IFM”), that they must undertake a self-assessment and declare, where applicable, which performance fee models are used (the “PF Declaration”) by the investment funds they manage, including Luxembourg-based unregulated funds managed by an AIFM established in Luxembourg and authorised pursuant to Chapter 2 of the AIFM Law.
As previously indicated in the said CSSF communication of 22 September 2021, 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 IFMs 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. Finally, the Guidelines aim at establishing a common standard in relation to the disclosure of performance fee models to investors, as the latter 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 once again 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 PF Declaration via the eDesk application on performance fees. This eDesk application is updated on a regular basis in order to implement new operational features to support the PF Declarations to the CSSF. Detailed information on those new features can be viewed in the dashboard of the eDesk application under the “What’s new” section.
Latest new features encompass among others the possibility for IFMs:
– to ensure maintenance of previously submitted PF Declarations that need to be updated (update feature) due to changes made to the initial PF Declaration, after the launch of new sub-funds or new classes, or after any other ongoing changes made in respect to performance fees to the fund, existing sub-funds or share classes, as the case may be. The IFM is responsible to ensure that PF Declarations are kept up-to-date on an ongoing basis,
– to declare performance fee models for unregulated funds they manage.
The list of funds and sub-funds managed by an IFM and potentially subject to the obligation to submit a PF Declaration is provided in the performance fee dashboard of the eDesk application on performance fees.
In order to avoid any doubts in respect of the above-mentioned Luxembourg-based unregulated AIFs, IFMs must apply the Guidelines and declare their compliance therewith, either immediately when performance fees are newly applied for the first time or at the beginning of the financial year following six months from the application date of the Guidelines (performance fees existing before the date of application of the Guidelines), regardless of the date on which the eDesk application on performance fees was effectively made available for the first time in relation to the said AIFs.
Furthermore, it is worth clarifying that a self-assessment (which could lead to an out-of-scope conclusion) must be completed in the eDesk application also with respect to:
- any (sub-)fund that is not subject to a performance fee, including (sub-)funds that fall outside the scope of the Guidelines;
- any (sub-)fund that has not yet been launched while having been approved by the CSSF or
- any (sub-)fund that had become inactive following a full redemption of its shares or units (and then became dormant in awaiting a reactivation within maximum 18 months).
As a reminder, the initial PF Declaration, as well as subsequent updates, must be completed and submitted by the IFM, thus by an eDesk user linked to the IFM.
An eDesk user guide dedicated to this PF Declaration is available in eDesk to provide additional assistance for completing the declaration.
All information related to the creation of user account(s) is detailed in the lower section of the eDesk Portal homepage.