The Key Information Document (KID): An Essential Guide for Investors
A European Regulatory Requirement
Established by the European PRIIPs (Packaged Retail Investment and Insurance-based Products) regulation, the KID has been mandatory since January 1, 2023 for all collective investments and packaged investment products. It replaces the former KIID (Key Investor Information Document) and aims to standardize the presentation of financial information across the European Union.
Content and Structure of the KID
The KID is presented as a standardized document of maximum three pages, structured around several standardized sections:
- General Information: Product name, ISIN code, management company, supervisory authority, and warning about any potential complexity of the product.
- Product Description: Investment objectives, management strategy, recommended investment horizon, and target investor profile.
- Risk Indicator: A scale from 1 to 7 combining market risk and credit risk.
- Performance Scenarios: Projection of potential returns under four scenarios (stress, unfavorable, moderate, favorable).
- Product Costs: Presentation of investment-related fees, including entry costs, exit costs, and recurring fees.
- Holding Period and Withdrawal Conditions: Recommendations on the holding period and impact of early withdrawal.
- Complaint Procedures: Contact details for organizations to reach in case of dispute.
- Additional Information: Access to past performance, document update procedures, etc.
Why is the KID Essential?
The KID plays a key role in investor protection by providing clear and objective information before subscribing to an investment. It helps avoid uninformed decisions and misleading commercial practices, while ensuring a better understanding of complex financial products.
Regular Updates
The KID must be updated at least once a year and revised in case of major changes to any of its elements, such as a significant change in fees or a modification of the risk indicator.
Where to Find the KID?
Available online on the websites of management companies and financial institutions, it can also be requested free of charge in paper or electronic format from investment advisors.
Conclusion
The Key Information Document is an essential tool for any investor wishing to thoroughly understand the characteristics and risks of their investment. Thanks to its standardized presentation, it facilitates informed decision-making.
