Just over one in 10 cross-border UCITS funds comply with incoming rules on performance fees set by German regulator BaFin, according to research company Fitz Partners.

The company analysed how cross-border funds would stack up against new restrictions on performance fee structures in Germany and Ireland. It found that 98% of Irish domiciled funds would be compliant with new Central Bank of Ireland (CBI) requirements but only 50% of all funds would satisfy them.

A Fitz spokeswoman told IPE that the company analysed 1,062 performance fee structures.

According to Fitz, in the past year the Irish regulator has reinforced several guidelines regarding performance fee structures, requesting the introduction of either permanent high-water marks or permanent clawbacks.

The central bank is currently consulting on a proposal to introduce compulsory annual crystallisation, bringing in a minimum period of 12 months over which to calculate performance fees. Fitz said 81% of Irish domiciled UCITS funds with a performance fee would also meet this criterion.

However, UCITS funds distributed in Germany may struggle to meet similar restrictions, according to Fitz. From December they will have to feature a minimum 12 months crystallisation period, a high-water mark or clawback mechanism running over at least five years, and caps on the total performance fee.

Fitz found that 13% of the UCITS funds in its sample would meet this requirement. Ireland-domiciled UCITS were best positioned, with 30% meeting the German regulator’s conditions, while 90% of Luxembourg funds with a performance fee would pass the test.

Hugues Gillibert, CEO of Fitz Partners, said: “Local regulators across Europe are certainly entitled to have different views when it comes to performance fee structures, but the creation of different technical local regulations such as these may introduce new barriers to entry to local markets, and more importantly a questionable uneven treatment of investors across Europe.”