Does Article 2(2a)(d) of the Delegated Regulation require a UCITS or AIF to provide a clear indication of whether it is actively or passively managed?

Yes. Article 2a(d) of the Delegated Regulation requires that a UCITS or AIF either has an index tracking objective, or alternatively allows for discretionary choices, and in both cases this must be disclosed in the objectives section of the KID. In the case of index-tracking UCITS or AIFs, using the terms ‘passive’ or ‘passively managed’ in addition to ‘index-tracking’ is recommended practice in order to assist investor understanding. A UCITS management company or an AIF manager should consider providing additional wording to ensure the meaning of the term ‘passive’ or ‘passively managed’ is clear. An index-tracking (passive) UCITS or AIF must disclose the index it is tracking and show performance against that index in the information published on past performance. An actively managed UCITS or AIF is one where the manager has discretion over the composition of its portfolio, subject to the stated investment objectives and policy. As opposed to a passive UCITS or AIF, an active UCITS or AIF does not have an index-tracking objective although it may include or imply reference to a benchmark. A spectrum exists regarding the level of discretion active UCITS or AIFs may wish to take or be permitted to take against a benchmark index. Some active UCITS or AIFs take a lower level of risk against a benchmark index than others, and some are managed without any reference to a benchmark index at all. Nevertheless, it should be equally clear to investors where the UCITS or AIF is actively managed. Explicitly using the terms ‘active’ or ‘actively managed’ is recommended practice in order to assist investor understanding, and a UCITS management company or an AIF manager should consider providing additional wording to ensure the meaning of the term ‘active’ or ‘actively managed’ is clear. Active UCITS or AIFs which are managed in reference to an index must provide additional disclosure on the use of the benchmark index (Article 2a(d)) and show past performance against it (Point 11 of Annex VIII)). They must also indicate the degree of freedom from the benchmark (see Q&A 3 in this section). Point 11 of Annex VIII requires active UCITS or AIFs managed in reference to a benchmark index to display past performance against that benchmark. It should be clear which benchmark index (or indices) the UCITS or AIF is tracking or is being managed in reference to. Where more than one version of a benchmark index is published (for example a total return version, price return version, etc.), it should be clear which version is being used by the UCITS or AIF. To assist investor understanding, it is recommended practice that active UCITS or AIFs which are not managed in reference to any benchmark should also make this clear to investors (see Q&A 2 in this Section). This information is summarised in the following graphic, which is also applicable to Q&As 2 and 3 below in this section and Q&A 2 in the section ‘Past performance’. The information disclosed in the UCITS or AIF KID should be consistent with the UCITS or AIF’s objectives and investment policy in the legal and regulatory documents of the fund.