The Key Investor Information Document (KIID) is a short document designed to describe the fund in terms that investors should find straightforward and easy to grasp, in a standardised format over two A4 pages. Its aim is both to improve understanding among retail clients of how funds operate and what risks they entail, and to reduce the volume of text that promoters have to translate into other languages in order to market their funds in other countries.

The introduction of the KIID in Ucits IV follows the failure of the ‘simplified prospectus’ concept incorporated into the Ucits III Management Company Directive to offer investors a document they could understand or to relieve significantly the documentary burden on fund promoters, in part due to variations in the way the provision was implemented by different EU member states as well as concern among promoters that omitting extensive sections of the full prospectus might expose them to legal risk.

The KIID is intended to be self-sufficient. The new directive stipulates that at a minimum, it should contain the name of the fund, a short description of the fund’s investment objectives and policy, a description of past performance or performance scenarios, details of costs, and the fund’s targeted risk/reward profile, as calculated by the Synthetic Risk and Reward Indicator (SRRI). It should be written in plain language and predefined form, content and length, enabling investors to compare one fund with another more easily.

Material changes to the fund – for instance, changes in the SRRI or in management charges – will require amendment of the KIID and notification of regulators in all countries where the fund is marketed, in addition to annual updates that must be introduced within 35 working days of the end of each year. Existing funds will benefit from a ‘grandfathering’ clause giving them a transition period of up to 12 months to publish a KIID; any funds launched on or after July 1, 2011 must have the KIID ready at time of launch.

The document must be published in one or more of the official languages of any member state in which the fund is marketed, or any other language approved by the country’s authorities. By contrast, there is no obligation to translate the full prospectus and financial accounts of the fund if these are already available in “a language customary in the sphere of international finance” – in practice English.