The Autorite des Marches Financiers (AMF) has found cases of Ucits funds marketed to retail clients with fees that are significantly hindering their ability to perform.
In its analysis of practices related to the cost of Ucits management, the AMF study found that of the 2,050 Ucits analysed, 14 had a portfolio composition very close to that of the index.
According to the AMF, this suggests a “rather passive” management style. Yet the level of fees for those Ucits remained high.
AMF’s study further found that for seven funds there was a very high level of turnover fees, totalling in excess of 2.5% of net assets.
In response to what it has deemed “questionable practices”, the AMF has approved the prohibition of turnover fees which will be effective January 1, 2026. The move is intended to stop Ucits and AIF managers benefitting from turnover fees, with the exception of real estate assets.
The AMF also plans to tackle active Ucits funds which feature high fees despite a passive management style, as well as outright passive Ucits funds with high fees.
It has stated that for active funds, investment service providers must have procedures in place to identify funds with high fees relative to their tracking error in comparison to their benchmark.
For passive funds, the AMF has added that investment service providers must have procedures in place to compare the level of fees of funds with a passive management objective with those of comparable funds.
The AMF expects these procedures will ensure that consideration has been made as to whether lower-cost equivalent collective investments could be more suitable for the client’s profile.
The original study, which was coordinated by European Securities and Markets Authority (ESMA) and which the AMF took part in, questioned 45 asset managers representing almost 2,050 French and foreign Ucits with a total of €766 billion assets under management.
© 2022 funds europe
