ESMA · ESMA_QA_1108 Answer Published

ESMA’s guidelines on ETFs and other UCITS issues - Efficient portfolio management techniques

Regulation
Undertakings for Collective Investment in Transferable Securities Directive (UCITS) Directive 2009/65/EC
Topic
Efficient portfolio management (EPM) techniques
Submitted
2013-03-15
Answered
2013-03-15
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Question

According to the guidelines, all revenues arising from efficient portfolio management techniques, net of direct and indirect operational costs, should be returned to the UCITS. Does this mean that securities lending agents should not be paid for their services?

Answer

[ESMA 34-43-392 UCITS Q&A, section 3, Q&A 4a] No. The guidelines do not prohibit the deduction from gross revenues arising from efficient portfolio management techniques of fees paid to securities lending agents as a normal compensation for their services in the context of such techniques. However, pursuant to paragraph 35 of the guidelines, the annual report of the UCITS should contain details on the revenues arising from efficient portfolio management techniques for the entire reporting period together with the direct and indirect operational costs and fees incurred.
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This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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