FRANKFURT Dec 22 Germany's markets regulator
plans to require asset managers to be clearer with retail
investors about how actively they manage their funds, as a
result of its investigation into so-called closet index funds.
Europe's financial markets regulator said earlier this year
that up to a sixth of retail-focused equity funds marketed as
being actively managed may be misleading investors by covertly
tracking a stock index.
Consumers have long suspected some of the funds that charge
them higher fees to scour the market for the best picks may in
reality be "closet" trackers that mimic the performance of stock
Actively managed funds commonly charge fees that are
multiples of those charged by trackers.
German watchdog Bafin said on Thursday its own investigation
turned up only a few cases in which a fund was being marketed as
actively managed and in reality closely tracked a fund.
These funds, however, had significantly lower management
fees than investment firms commonly charge for actively managed
funds, and they were no longer being actively marketed.
Bafin said it would nonetheless introduce new transparency
rules from mid 2017 that will require asset managers to disclose
whether their retail-focused equity funds are actively managed
or merely track an index.
If they use a benchmark, they will have to name it and also
specify whether and by how much they intend for it to be
exceeded or fallen below.
(Reporting by Maria Sheahan; Editing by Tina Bellon and Mark