December 2025 was a particularly significant month in terms of regulatory updates affecting Fairmat:
On 18 December 2025, EU institutions reached an agreement on the implementation of a reform package known as the Retail Investment Strategy. The final text has not yet been published; however, the topics addressed include cost transparency, enhanced value-for-money oversight of products, new rules on adviser incentives, and updates to the principal financial services directives.
On 5 December 2025, the ESAs issued a new update to the PRIIPs Q&A, focusing in particular on the classification of PRIIP categories, performance scenarios, the use of benchmarks/proxies, and the management of historical data series for the underlying asset.
We confirm that the methodologies adopted in our solutions are consistent with the guidance provided by the Authorities. A detailed analysis follows below.
Q&A 27 – PRIIP Classification (Category 2 vs Category 3)
Q&A 27 clarifies that a UCITS product whose payoff at maturity coincides with the redemption value of a bond portfolio cannot be automatically classified as Category 3. The existence of a defined maturity and an “expected” redemption at nominal value does not, in fact, equate to unconditional capital protection.
Since the redemption value of the bonds does not constitute a guaranteed minimum payoff, the product falls within Category 2, with the consequent application of the relevant methodology for performance scenarios. Such scenarios must fully reflect historically observed negative returns; the application of a “floor” is envisaged exclusively for products with unconditional capital protection (Annex IV, point 4; Annex V, Part I, point 3(b)).
Q&A 28 and Q&A 29 – Adequacy of the Benchmark/Proxy
Q&A 28 and 29 specify that the assessment of the adequacy of a benchmark or proxy pursuant to Annex IV requires a comprehensive evaluation of the consistency of the PRIIP’s risk-return profile. Such analysis must include not only current exposures but also credit liabilities, leverage (both effective and maximum permitted), and all asset classes potentially eligible under the investment policy. It is not correct to exclude ex ante eligible asset classes solely because they have not yet been utilised.
Q&A 30 – Use of Logarithmic Returns
Q&A 30 confirms that the use of logarithmic returns is mandatorily required in the cases expressly provided for by the PRIIPs Delegated Regulation (for example, Annex II, point 11 and Annex IV, point 18).
In other cases, such as the Category 2 performance scenarios under point 7 of Annex IV – where there is no express regulatory provision – Fairmat, as set out in the shared methodological note, confirms the use of logarithmic returns both in the selection and parameterisation of the return distribution and in the modelling of the underlying asset’s evolution within simulations, thereby ensuring full consistency in the representation of compounding effects, in accordance with point 44 of Annex IV.
Q&A 31 – Historical Data Series with Different Frequencies
Q&A 31 recognises the possibility, for funds transitioning from weekly to daily NAV, of temporarily continuing to use weekly data or resorting to proxies for the construction of daily series, provided that the choice is adequately documented and consistent with the characteristics of the product.
The Fairmat methodology, when dealing with series of different frequencies, favours the lower frequency for the purposes of determining the minimum length of the historical data series used for the VEV calculation.
Reference: To consult the complete document, please refer to the following link:
https://www.esma.europa.eu/sites/default/files/2023-05/JC_2023_22_-_Consolidated_JC_PRIIPs_Q_As.pdf
8 January 2026 Category: News
