Some of the largest fund management firms in the City have been accused of ignoring Europe-wide rules requiring firms to disclose how funds are performing relative to the appropriate benchmarks.
Better Finance, a trade body for investors, has conducted research indicating that at least 30 per cent of the larger actively managed funds available to UK investors are not properly completing the Key Investor Information Document (KIID), which requires funds to disclose the benchmark against which the fund should be judged.
Better Finance examined 2,033 actively managed funds for sale in Europe that have assets under management of at least €50m (£43.8m) each and an annual charge of at least 0.65 per cent.
All the funds considered in the research have been around since 2005 at the latest.
Better Finance said the Kiid rules require: “the KIID must clearly indicate in Section 1 (Objectives and Investment Policy) of the KIID whether it uses, either explicitly or implicitly, a benchmark; the KIID must publish the past performance of the index alongside the past performance of the fund".
The research indicated 1,239 of the funds considered, or 61 per cent had Kiid documents that complied with the EU rules, and 30 per cent did not comply.
A further 7 per cent of the funds declared they had no benchmark, but Better Finance believe the funds in question do have a benchmark and so are in breach of the “spirit” of the rules.
Guillaume Prache, managing director of Better Finance, said: “These persistent, widespread and clear breaches of EU investor protection rules, as evidenced by this research, are yet another call on EU authorities to urgently and adequately stop this ongoing detriment to EU citizens as savers and investors, especially in light of the current debate on the necessary reform of the European System of Financial Supervision”
Among the firms listed by Better Finance as, according to its research, not complying with the rules, is Janus Henderson. Funds run by the company that invest in Latin America and Europe excluding UK were among those listed by Better Finance.
A spokesperson for Janus Henderson said: “We include benchmark data on our KIIDS when they are named in the objective and policy, as the rules prescribe, and performance against comparator/reference index is clearly shown our website and fund factsheets for the four funds mentioned and across our wider product range."
A range of funds managed by Fidelity are also mentioned, including the Fidelity Greater China fund and the Fidelity Telecoms fund.
A spokesperson for Fidelity said according to its interpretation the rules did not apply to the funds the research looked at as EU regulations require a benchmark to be included in the prospectus and KIID if a fund is being managed to a stated index.
"These funds are actively managed and are not managed to track an index.”
David.Thorpe@ft.com
