Question ID: 3088 - PRIIPS 178
Regulation Reference: (EU) 2017/653 - PRIIPs Delegated Regulation for key information document
Topic: Key information document (KID), Packaged retail and insurance-based investment products (PRIIPs)
Article: point 16 of Annex IV of the Delegated Regulation((a))(N/A)
Status: Final
Date of submission: 15 May 2024
Question
According to point 16 (a) of Annex IV, the assessment of the appropriateness of a benchmark or proxy depends, inter alia, on the risk-return profile where the benchmark or proxy and the PRIIP fall into the same category of SRI or volatility and expected return or both. In this context, must it be taken into account whether the PRIIP has credit liabilities? If so, is the current leverage ratio or the maximum leverage ratio permitted under the investment conditions relevant?
Background of the question
N/A
EIOPA answer
In accordance with points 16 and 17 of Annex IV of the PRIIPs Delegated Regulation, PRIIP manufacturers are responsible for assessing, inter alia, the consistency of the risk-return profile of the PRIIP with that of the benchmark or proxy chosen, as well as the consistency in terms of the volatility or historical volatility. In this respect, it is expected that any liabilities or leverage of the PRIIP will need to be taken into account as part of this assessment. In view of point 16(d) concerning ‘potential assets in which the PRIIPs invests’, it is not sufficient to consider only the current leverage ratio; the maximum leverage ratio should also be taken into account. In addition, it is relevant to note the last subparagraph of point 16 of Annex IV, which states that, ‘PRIIP manufacturers may use criteria additional to those listed in the first subparagraph provided they demonstrate that those additional criteria are relevant in terms of the objectives of the PRIIP and the type of assets in which the PRIIP invests or the type of underlying investments to which the PRIIP offers exposure’. Where a PRIIP manufacturer identifies that additional criteria are relevant to this assessment, they are expected to take these into account.