Volatility linked to the coronavirus pandemic means up to 40% of UCITS funds could need to reissue their key investor information documents (KIIDs) under current rules, according to FE fundinfo.
The fund data and technology company said regulatory rules mean a fund's KIID has to be updated and reissued if its synthetic risk and reward indicator (SRRI) is different to what has previously been stated for 16 consecutive weeks.
FE fundinfo analysed its database at the start of June and found almost 1,200 UCITS share classes had experienced at least ten successive weeks of change, with more than 700 of these set to approach the 16-week deadline during the month.
Head of regulations Mikkel Bates said the Covid-19 pandemic was presenting the first "real test" of the KIID regime since it was introduced eight years ago.
"The Covid-19 pandemic is presenting the first real test where the markets are experiencing sustained periods of volatility and this is causing a lot of regulatory and compliance issues among fund groups.
"It is also a huge test for those service providers in the KIID space who monitor the data underlying these documents to ensure they remain compliant."
He added: "With so many share classes approaching the 16-week cut-off point, it will be interesting to see how these service providers respond to the challenge. As with any service which has not been effectively tested, there may be some bumps in the road ahead and some unforeseen challenges. Many providers might have to re-evaluate and adapt their offerings."
FE fundinfo said some of the confusion surrounding SRRI reporting for UCITS funds stems from a similar regulation for packaged retail and insurance-based investment products (PRIIPs) KIDs, the summary risk indicator (SRI).
Bates explained the SRRI on a UCITS KIID is a measure of volatility of the fund's prices over the previous five years. It is presented on a KIID on a scale from 1 to 7, based on prescribed intervals.
He said it should be calculated and monitored weekly, in the case of daily-priced funds, and if the actual SRRI differs from the published SRRI for a period of four months (16 weeks), the KIID must be updated and reissued with the new SRRI.
"The SRI on a PRIIPs KID meanwhile is designed to show the relative risk of a PRIIP, using a combination of market risk (based on the historical price volatility) and credit risk (i.e. the risk of the issuer defaulting), where applicable.
"The SRI is also shown on a scale from 1 to 7, but because it is possible to lose more than the amount invested on certain PRIIPs, the intervals do not match those on a UCITS KIID SRRI. A PRIIPs KID must be updated and reissued when the published level is no longer the most common when comparing all observations over a four-month period."