The European Supervisory Authorities has published a consultation paper on changes to Key Information Documents.
Laura Suter, personal finance analyst at investment platform AJ Bell, comments:
“Many parts of the industry have called for Key Information Documents (KIDs) to be changed and it’s disappointing that this latest consultation is attempting to rush through changes before European parliament elections next year, which has severely limited the scope of the changes. The period for industry to respond to this consultation has been slashed to a just a month and the ESA acknowledges that it can’t carry out the level of work needed before it submits the amendments in January next year.
“A fundamental problem with the KID rules is that the projections of the returns likely to be handed to investors are based on past performance and a decade-long bull run, and so can look wildly optimistic. Even investment managers who could benefit from increased sales on the back of the rosy picture painted of future returns have called for the documents to be changed or suspended.
“What’s more worrying is that the documents are due to be rolled out to UCITS funds from 2020, meaning they will be seen by a far wider group of investors. The last thing the investment industry needs is for investors to be sold on optimistic returns forecasts, only to be disappointed if unfavourable markets hit, and ultimately lose trust with the industry.”