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02 February 2016

ESMA updates on supervisory work on closet indexing


ESMA is concerned that closet indexing may harm investors as they are not receiving the service or risk/return profile they expect based on the fund’s disclosure documents while potentially paying higher fees compared to those typically charged for passive management.

Steven Maijoor, ESMA Chair, said: “Closet indexing is an issue which has attracted the attention of investor protection groups and investors alike throughout the European Union and ESMA has played a key role in an EU-wide inquiry to get to the heart of the matter. Investor protection is core to our mission and the preliminary findings raise questions that merit closer analysis. Fund managers must provide investors with information that is fair, clear and not misleading. In partnership with national regulators we are taking a closer look into this issue.”

Next steps

ESMA will continue to work with national regulators to determine further actions as the analysis gives only a first indication of whether particular funds are closet index trackers.  This work will include an active role for ESMA in the coordination of further analysis carried out at the national level, while fuller investigations on a fund-by-fund basis will necessarily fall in the remit of national competent authorities, as part of their regular supervisory work. Together with national competent authorities, ESMA will also assess the need for further steps to ensure that all market participants comply with disclosure obligations to the full extent.  

Full statement



© ESMA


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