15 March 2019

Collecting 3rd party fund data under MIFID II and PRIIPS

The Markets in Financial Instruments Directive II (MiFID II) and the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation that were introduced in 2018 have brought new requirements for firms to disclose specific information on the costs and charges of certain investment products. The overall aim of the new legislation is to bring more transparency to the industry and to help investors better assess the value and risk of potential investments.

In order to disclose the correct data and documents, asset managers have to run cost and charges calculations for their own funds. This process is often complex and time consuming, prone to errors and risks of non-compliance. And the complexity and the size of the challenges grow exponentially for those who invest in third party funds. Another step is added because before the process can start, the data that is required needs to be collected from third parties, and you need to spend time communicating with every owner of the data, rather than focusing on your business.

So what data are you required to collect from third parties?

Asset managers. You need to collect EMTs or EPTs from the original fund manager to get the underlying cost and charges data for all the third party funds that you invest in. You also need to run the cost and charges calculations for across your own funds.

Fund distributors. You need to obtain EMTs from asset managers so that you can provide the Key Information Document (KID) to your clients and have MiFID II target market data on hand. Under MIFID II, you must also collect transactional and ongoing charges for the investment options you use, and provide information on an aggregated basis to the manufacturer regarding adequacy of target market and distribution strategy.

Insurance companies. You need to collect European PRIIPS Templates (EPT) and the Luxembourg PRIIPs Templates (LPT) from asset managers for all the investment options you use. You also need to check quality and accuracy of the content of the file, and revert back to the owner of the data in case of problems.

Did you know?

KNEIP can support your calculation and reporting obligations mandated under MiFID II and PRIIPs regulations, so you can expedite the delivery time of data and documents from manufacturer to investor. From our digital platform you can collect Target Market and PRIIPS definitions in standard formats for EPT and EMT, and verify data compliance with the definitions as outlined by the European Working Groups. What’s more, the data can be automatically fed in our end-to-end transaction cost calculation solution for the look through of target fund investments & fund-of funds, so you don’t have to run the calculations and you can trust that the results are accurate.

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