The AMF is investigating performance fees charged by investment funds.
An investor who had invested in a UCITS in 2011 recently filed a complaint with the Financial Markets Authority (AMF) ombudsman after noticing a significant increase in his fund’s fees between 2019 and 2020. The fees rose from 606 euros in 2019 to 1,942 euros in 2020, without a satisfactory explanation from his bank. The investor then transferred his account to a new account custodian and contacted the AMF ombudsman to seek reimbursement of the excess fees.
Upon investigation, it appears that the management company charged a performance fee for the year 2020, in accordance with the provisions of the Key Information Document (KID) and the fund’s prospectus provided to the client. This fee is charged when the fund exceeds a certain performance target, which was the case in 2020, when it outperformed the benchmark index by 28%.
The AMF Ombudsman confirmed that the additional fees were indeed in line with current regulations and the disclosure documents provided to the client. However, this case highlights the importance for investors to fully understand the fees associated with UCITS before committing to an investment.
Account holders must provide clear and detailed information on potential costs, in accordance with applicable regulatory guidelines. Investors, for their part, should pay close attention to the details in the Key Investor Information Document (KIID) and the prospectus, which include information on performance fees.
The AMF is advocating for greater standardization in the area of performance fees. Recently, a rule has been implemented stipulating that if a UCITS underperforms its benchmark index in a given year, the management company may not charge another performance fee for the next five years until it has first made up for that underperformance.
