On 10 March 2020, CSSF issued updated Frequently Asked Questions concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment. The update concerns disclosure of the performance fee, the investment manager’s fee and the investment advisor’s fee to investors of a UCITS.
- The fee model for any performance fees payable by a UCITS should be disclosed in the prospectus, as well as the investment manager as the entity entitled to receive such fee, and, should there exist a sharing arrangement of the performance fee with any investment advisor(s) contractually linked to the UCITS, the prospectus shall also inform about this arrangement.
- UCITS are obliged to have disclosure in the prospectus of all expenses and fees. This disclosure should distinguish between:
- Fee to be paid by the unit-holders, and
- Fee to be paid out of the assets of the UCITS.
Where a service fee is directly paid out of the assets of the UCITS to the investment manager(s), and possibly to any investment advisor(s) contractually linked to the UCITS, such a fee shall only pay for investment management, respectively investment advice and the method of calculation or the rate of the fee to each recipient must be disclosed in the prospectus.
When other expenses or fees for activities beyond the direct scope of investment management or advice are payable out of the assets of the UCITS to the investment manager(s) or investment advisor(s), such expenses or fees must be disclosed separately from the investment manager’s fee or the investment advisor’s fee, in a way that clearly informs investors about the nature of such expenses or fees. The CSSF clarified that as a general rule the investment advisor’s fee is expected to be at a lower level than the investment manager’s fee.
In cases where the option of an “all-in” fee is proposed, which implies that only one compensation amount is paid out of the assets of the UCITS to a recipient (commonly the management company) who will afterwards pay the other service providers to the UCITS, the prospectus must clearly state the scope and nature of such “all-in” fee. Ideally, each contractual recipient of this all-in fee should be specified. This provides clarity to investors concerning compensation, fees and expenses in order to allow comparison across UCITS and facilitate investment choice.