Key Information Document (KID)

A Key Information Document (KID) is an essential document designed to provide investors with critical information about a financial product before they make an investment decision. Introduced as part of the European Union’s Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation, the KID is a standardized document that aims to enhance transparency and help retail investors better understand the risks, rewards, and costs associated with an investment product.

Purpose and Importance of KID

The primary goal of the KID is to offer concise, accessible, and easy-to-understand information about investment products, enabling investors to compare different offerings across the EU. It addresses the need for greater transparency in the complex world of financial products, ensuring that investors are well-informed about the potential outcomes of their investments.

Key Components of a KID

A typical KID includes several crucial sections, each designed to provide specific information about the investment product:

Product Overview: A brief description of the product, its objectives, and the type of investor it is designed for. This section often outlines the investment strategy and the target market.

Risk Indicator: A visual representation, usually a risk scale, that indicates the product’s risk level, taking into account factors like market volatility and the complexity of the investment.

Performance Scenarios: This section presents various performance scenarios, including unfavorable, moderate, and favorable outcomes, helping investors understand the potential returns and losses.

Costs and Fees: Detailed information about all the costs associated with the investment, including one-off and ongoing charges, transaction costs, and any performance-related fees.

Other Relevant Information: Additional details that might affect the investment decision, such as the minimum investment period, the possibility of early withdrawal, and the tax implications.

Significance for Investors

The KID empowers investors to make more informed decisions by providing a clear and standardized overview of the investment product’s key features. By comparing KIDs from different products, investors can assess which investments best align with their risk tolerance, financial goals, and investment horizon.

Challenges and Considerations

While KIDs are designed to simplify the investment decision process, investors should still exercise due diligence. The scenarios presented in the document are based on projections and cannot guarantee future performance. Therefore, investors should consider other sources of information and, if necessary, consult with a financial advisor to get a comprehensive understanding of the investment product.

Hanseatic’s Approach to Transparency

Hanseatic Alternative Investments AIFP, recognizing the importance of informed investment decisions, provides a Key Information Document for its Hanseatic Sustainable Residential Real Estate Fund. The document reflects Hanseatic’s commitment to transparency, outlining the fund’s focus on sustainable residential properties, risk profiles, performance scenarios, and fee structure. By doing so, Hanseatic ensures that investors have access to the essential information needed to understand the fund’s alignment with the EU’s sustainability goals and regulatory standards.