Investments  

‘Advisers need to carry out cull closet tracker funds’

The head of investments for County Durham-based wealth management firm Three Counties said advisers should instigate an “organic closet cull” by boycotting funds that appear active but bear all the hallmarks of an index tracker.

Mr Alexander said it was not the responsibility of the fund management industry to “make it easier” for advisers to discern between truly active and closet tracker funds.

He said: “Apparently it’s a bit too hard to select funds, to do the analysis for which the advisers are paid for by their clients. There seems to be no connection between giving advice and actually backing up that advice through thorough analysis.

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“We cannot do anything about do-it-yourself clients but we can when it comes to advised and discretionary clients. My suggestion is that thorough fund analysis is carried out by advisory firms before any fund recommendations. If this is continued on a regular basis then the use of these closet trackers would diminish.”

Mr Alexander added that said that under this scenario new money would not be allocated and existing funds would be switched to either true passives on a cost basis, or true actives on a performance basis.

Industry view

Gina Miller, partner of London-based wealth manager SCM Private and co-founder of the True and Fair Campaign, said: “How can an adviser make the call if they cannot see all the holdings? If the fund management industry wants to avoid regulation it should publish active share and transparently show holdings on a quarterly basis, but it has showed no signs of doing this.”