PRIIPs: Concerns about misleading performance scenarios

Need to eliminate overly optimistic results

clock • 4 min read
Ayal Leibowitz of LPA
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Ayal Leibowitz of LPA

PRIIPs suffers lots of criticism around its methodology for performance scenarios.

Both manufacturers and consumers claim the results are often too optimistic, since they are based on the past five-year performances and these were positive. In an effort to solve these issues, the ESAs introduce in PRIIPs RTS v2 a new methodology for the calculation of the favourable, moderate and unfavourable scenarios for most funds. Or more precisely, it applies to linear products, called Category 2 in PRIIPs terminology. The new methodology follows a back-testing approach over at least 10 years and the unfavourable scenario is based on the worst scenario found. Why should t...

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