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SRRI and SRI calculation under PRIIPs and UCITS

Similarities & differences between UCITS and PRIIPs risk indicators calculation

PRIIPs regulation assigns each product a single SRI from 1 to 7, thus communicating its risk and reward position to the retail customer. As a step up from the UCITS’ SRRI, SRI calculation methodology introduces the credit risk dimension and assesses market risk using a more complex Cornish Fisher methodology.

Regulatory changes and migration to new PRIIPs RTS live in Jan 2023

 

In response to the industry consultation in 2019 and 2020, the European Commission published in 2021 a few amendments to the methodologies for risk, reward and cost compilation.

The overview of all the upcoming changes and how to prepare to the successful migration to the new RTS can be found in the article here.

As far as the upcoming changes pertaining to the risk compilation go, they are fewer and less impactful than changes for other disclosures (e.g. performance scenarios):

  • As anticipated, the original formula for VEV had a small mistake in it that has now been corrected; and
  • The bucket limits for the MRM determination from VEV are now clearly defined to avoid any ambiguity.

The most notable change is that the PRIIP manufacturer can now opt to increase the SRI if they deem the compiled SRI to inadequately represent of the risk of the PRIIP. When opting for this option, the manufacturers should document the decision-making process.

UCITS KIID and PRIIPs KID

 

Following a decision by the European Parliament in November 2021, both the end of the PRIIPs exemption for UCITS funds and the go-live date for the regulatory technical standards (RTS) are set for the 1st of January 2023, and publication of UCITS KIIDs will no longer be a requirement in Europe as from 1st of January 2023.

This means that PRIIPs KID and UCITS KIID will not need to be published in parallel for UCITS funds open to retail investors. For non-retail investors, on the other hand, the management companies will be given a choice as to which document to publish.

Feel free to contact us for more information, including the specific KI(I)D requirements for UK or Switzerland.

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