Given that the remuneration of UCITS managers is, at least partly, based on the performance of the fund, there is an incentive to increase the level of risk in a fund's portfolio in order to increase potential returns. However, the higher level of risk exposes the fund investors to higher potential losses than might be expected given the disclosed risk profile of the fund. Remuneration structures might be skewed so that managers participate in materialized returns but do not participate in materialized losses, creating further incentives to take on higher risk strategies. Furthermore, remuneration structures are seldom disclosed in the.
