Up to 15% of active equity funds appeared to just track their underlying market index between 2012 and 2014, with Europe’s financial regulator warning it is to look more closely at the issue.
The European Securities and Markets Authority (Esma) studied 2,600 actively managed equity funds following complaints from consumer organisations and the press about closet index-trackers.
Esma is concerned that investors are paying high fees and not receiving the service or risk/return profile they expect.
The funds included in the study were all Ucits funds domiciled in the EU, with assets under management of more than €50 million, launched prior to January 1, 2005, and charging management fees in excess of 0.65%.
“Investor protection is core to our mission and the preliminary findings raise questions that merit closer analysis,” said Esma chairman Steven Maijoor.
“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.”
Maijoor said Esma would continue to work with national regulators to determine what actions should be taken. The regulators intends to carry out more investigations and says the examination of specific funds remain the responsibility of national authorities.
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