skip to Main Content
Head Office: +353 1 668 7684


UCITS1 V was published in August 2014 and EU member states transposed the directive into national law on 18 March 2016. Two of the main areas relate to a new depositary regime and regulations governing UCITS remuneration policies. The focus of this briefing note is on remuneration. Remuneration relates to fixed and variable pay and payments related to early termination and pensions. In addition, it includes performance fees as well as non-cash benefits, such as share options.

A key element, in accordance with UCITS V, is that each UCITS must establish remuneration policies which encourage sound and effective risk management and do not promote excessive risk-taking.

The remuneration provisions apply to professional staff whose functions have an impact on the risk profile of the UCITS which would include:

  • Executive and non-executive directors
  • Senior management
  • Employees involved in compliance, internal audit and risk management functions
  • Employees responsible for portfolio management
  • Employees of entities to which investment management functions have been delegated.

Recent Developments

On 23 July 2015, ESMA2 published a consultation paper on sound remuneration policies under the UCITS Directive and AIFMD. The deadline to respond to the consultation paper was 16 October 2015 and following these responses, ESMA issued its final UCITS V remuneration guidelines on 31 March 2016. The guidelines are due to be effective from 1 January 2017.

The issues relating to proportionality identified in the consultation paper have not yet been resolved in the final remuneration guidelines. Proportionality relates to fund managers complying with UCITS V remuneration requirements in a manner that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities. ESMA has written to European Commission policymakers for legal clarification on the proportionality principle and has not included any guidance on the prospect of certain fund managers not applying the requirements of the pay-out process3 for variable remuneration. It is hoped that the legislative clarification will be available before 1 January 2017.

In the letter to the EU Commission, ESMA has stated that it would not be appropriate for all pay-out process requirements to apply to:

  • Fund Managers with smaller AUM
  • Fund Managers with simple organisation structures
  • Fund Managers where the scope and activity of their activities is limited.

In the letter, ESMA has also stated that it considers that it would be inappropriate to apply the pay-out provisions to smaller amounts of variable remuneration and to certain staff where it would result in a misalignment of the interests of staff and investors in funds.

Actions Required by UCITS

  • The KIID4 should include a statement that all remuneration policies are available online and that a paper copy can be made available if required. ESMA has confirmed that updates to KIID’s with respect to remuneration are only required at the next annual update after 18 March 2016 or the next time after this date where the KIID is revised or replaced
  • Prospectus updates, to include details of the up-to-date remuneration policy including a description of how remuneration is calculated, will be required by 18 March 2017 at the latest
  • For annual reports, EMSA confirmed that remuneration details are not required for a period ending before 18 March 2016. For annual reports in relation to periods which end on or after 18 March 2016, but before the UCITS has completed its first annual performance period, the annual report should contain remuneration details on a best efforts basis.

Download our Update – UCITS V Remuneration – April 2016 here

How can KB Associates Assist?

KB Associates offers a range of services to investment funds including:

  • The provision of designated persons to perform UCITS business plan and AIFMD programme of activity managerial functions
  • The provision of UCITS/AIF operational support
  • The provision of UCITS/AIF management company services
  • Service provider selection
  • The provision of directors
  • MLRO5 services
  • Company secretarial services.

If you would like to discuss any issues raised in this article or related to KB Associates’ services in general, please feel free to contact Mike Kirby (+353 1 667 1980), Peter Northcott (+44 203 170 8813) or Mike Parton (+1 345 946 4224).


1 Undertakings for Collective Investment in Transferable Securities
2 European Securities and Markets Authority
3 Deferral requirements for variable remuneration
4 Key Investor Information Document
5 Money Laundering Reporting Officer

Back To Top