On 30 March 2021, the European Securities and Markets Authority (ESMA) updated its Questions and Answers on the application of the Undertakings for Collective Investment in Transferable Securities Directive (Q&A on the UCITS Directive) and its Questions and Answers on the application of the Alternative Investment Fund Managers Directive (AIFMD) (Q&A on the AIFMD).

ESMA added two new Q&As (applicable to both Q&As on the UCITS Directive and the AIFMD) relating to the ESMA’s guidelines on performance fees in UCITS and certain types of AIFs (the Guidelines) whereby it confirms the following :

  • The Guidelines on performance fees do not prevent to pay performance fees during the performance reference period of 5 years and/or in the first years of a fund’s existence, in case the fund has not existed for 5 years“.
  • Managers of any funds already compliant with paragraphs 40) and 41) of the Guidelines on performance fees before the application date of the guidelines should look at the past 5 years/whole life of the fund for the purpose of setting the performance reference period (i.e. they should not reset the performance reference period after the application date of the guidelines). In all the other cases, managers should apply the performance reference period starting from the beginning of the financial year following 6 months from the application date of the Guidelines (i.e. the performance reference period should start at the beginning of the financial year following 5 July 2021; by way of example, if the financial year of the fund starts on 1 September 2021, the period 1 September 2021 – 1 September 2022 should be considered as the first year of the performance reference period)

ESMA also added a third new Q&A relating to the scope of the Guidelines in respect of ELTIFs in the Q&A on the AIFMD whereby it confirms the following :

The Guidelines on performance fees apply to managers of UCITS and, in case Member States allow AIFMs to market to retail investors in their territory units or shares of AIFs they manage in accordance with Article 43 of the AIFMD, they also apply to AIFMs of those AIFs, except for:

  1. a) closed-ended AIFs; and
  2. b) open-ended AIFs that are EuVECAs (or other types of venture capital AIFs), EuSEFs, private equity AIFs or real estate AIFs.

Therefore, ELTIFs marketed to retail investors that do not have a closed-ended structure, within the meaning of Article 1(2) of the Delegated Regulation 694/201425 and are not venture

capital/private equity or real estate AIFs are in scope of the guidelines.”

Links to the updated Q&A on the UCITS Directive: https://www.esma.europa.eu/sites/default/files/library/esma34_43_392_qa_on_application_of_the_ucits_directive.pdf

Links to the updated Q&A on the AIFMD: https://www.esma.europa.eu/sites/default/files/library/esma34-32-352_qa_aifmd.pdf

For any questions concerning the above, please do not hesitate to contact our investment management team.