AIC research highlights dangers of Key Information Documents

  • Too many KIDs overstate likely future performance and understate investment risk
  • KIDs will encourage ‘buy high, sell low’
  • AIC will not be hosting KIDs on its consumer website as it would not be responsible to do so
  • Calls on FCA to take steps to prevent making a bad situation worse

Following research into the Key Information Documents (KIDs) being published by its members, the Association of Investment Companies (AIC) is calling on the FCA to take steps to protect consumers.  The methodologies and disclosures required by KIDs lead to misleading information and the FCA should take steps to prevent this information being more widely distributed than it needs to be.

For example, the AIC believes that data providers and platforms should not extract individual figures from KIDs and present them in isolation where consumers would not have the benefit of the context that the KID can at least provide. Consumers should only receive the KID in full.

The FCA, data providers and platforms should also make it clear to investors that investment company KID disclosures are calculated on a different basis to those provided in open-ended funds’ Key Investor Information Documents (KIIDs) and therefore are not comparable.  Ranking and comparison tables should also not show information from open-ended KIIDs alongside those of investment company KIDs.

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said: “Having seen the reality of KIDs, we are in no doubt that many are misleading to investors and it would not be responsible for us to distribute them more widely. So we won’t be hosting them on our website.

“I have a huge amount of sympathy for members and their managers who are required to produce this information knowing that it may mislead investors.  If some of this information had been put into a financial promotion in the past, the distributor might well have faced regulatory sanctions, and rightly so.

“We welcome the recent announcement by the FCA that allows members and managers to provide some additional context if they feel the disclosures are misleading.  However, this demonstrates the flaws in the methodology and why extracting individual figures from the KIDs and presenting them without this context would simply make a bad situation worse.

“I have heard people say that KIDs are not worth the paper they are printed on. Unfortunately, in some cases, it is even worse than this.”

Key research findings

The main research findings are:

KIDs often overstate likely future performance

42 investment company KIDs indicate possible future returns of more than 20% per year in the ‘moderate’ performance scenario. 45 investment company KIDs indicate possible future returns of more than 10% in the ‘unfavourable’ performance scenario.

KIDs often understate investment risk

129 investment company KIDs have a Summary Risk Indicator of 3 (which must be described as ‘medium-low’ risk).  9 have a Summary Risk Indicator of 2 (which must be described as ‘low risk’). 

European guidance suggests that the narrative that must accompany this disclosure should explain that these ratings indicate that investors have a low chance of losing money in poor market conditions.

Venture Capital Trusts have the lowest average Summary Risk Indicator (3.4) of the AIC’s membership, despite investing in small, higher risk businesses.

Investment company KIDs not comparable with open-ended fund Key Investor Information Documents

Open-ended funds will not have to produce information on the same basis as investment companies until 2020. However, they currently produce a Key Investor Information Document (KIID) which includes a Summary Risk and Reward Indicator (SRRI).

Despite having similar titles, and being presented in a similar fashion, these documents use very different methodologies. Unless they are warned, consumers may well use these two documents to make investment decisions not realising that key information is not comparable.

For example, the average SRRI (Summary Risk and Reward Indicator) for open-ended funds investing in equities is 5.1. The equivalent average SRI (Summary Risk Indicator) for investment companies investing in equities is 4.0.  Consumers are therefore being given the impression that investment companies are significantly less risky than open-ended funds.

KIDs will encourage investors to ‘buy high, sell low’

After a sustained bull market, KIDs will suggest to investors that they will get higher investment returns in the future. After a sustained bear market, they will suggest that investors will get lower future returns. ‘Buy high, sell low’ is a classic mistake that less experienced investors often make, and KIDs will encourage this.


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  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 348 members and the industry has total assets of approximately £178 billion.
  2. Figures for the performance scenarios have been based on information disclosed in 384 Key Information Documents produced for investment companies. The average Summary Risk Indicator for Venture Capital Trusts is the average of the Summary Risk Indicators disclosed in 57 Key Information Documents produced for Venture Capital Trusts. The average Summary Risk and Reward Indicator for open-ended funds investing in equities has been calculated as the average of the Summary Risk and Reward Indicators disclosed in 1,602 Key Investor Information Documents produced for open-ended funds which invest predominantly in equities. This has been compared to the average of the Summary Risk Indicators disclosed in 198 Key Information Documents produced for investment companies which invest predominantly in equities.
  3. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.