Financial Times: Big equity funds accused of breaching EU disclosure rules

04 June 2018

Up to a third of large equity funds offered to European investors have been accused of breaching EU market rules over providing comparable performance data.

Better Finance, the investor rights campaign group, said that more than a quarter of the funds it previously labelled as potential “closet trackers” do not provide required benchmark information in fund documents, including products from Fidelity International, Janus Henderson and Standard Life Aberdeen.

Policymakers in Europe and the US have in recent years stepped up their scrutiny of so-called closet trackers — funds that closely follow an index but charge high fees that are more typical of actively managed products. Disclosing benchmark performance is one way of helping consumers understand how closely funds mimic an index and whether they are being overcharged.

The Better Finance research showed the level of compliance varied by funds domiciled in different jurisdictions. In Luxembourg, for example, two-thirds of the potential closet trackers and 43 per cent of all domiciled funds did not feature required benchmark information in their Kiids. The UK also had 43 of its domiciled funds with missing information, while 54 per cent of Irish funds and 38 per cent of German funds did not disclose the required benchmark information.

In France and Spain nearly all funds met the required standards.

Last year Better Finance produced a list of potential closet trackers following a similar study by the European Securities and Markets Authority, the EU regulator. Since then the UK’s Financial Conduct Authority carried out its own research and identified 84 potential closet trackers. Yet regulators in Luxembourg, Germany and France undertook similar investigations and said they found little evidence of closet tracking.

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