In the first few months of 2020, several companies have taken steps to transfer unit-holders, made easier by another FCA rule change that allowed businesses to dispense with seeking unit-holder approval in those cases where a move would be in their best interests.
Fees also come under scrutiny in the context of the costs of the fund, comparable market rates, comparable services and economies of scale, and together this has directly or indirectly contributed to some fee reductions or restructures on individual funds or fund ranges.
That the assessments published so far are a mixed bag in terms of presentation, engagement and information is no great surprise in light of the FCA’s deliberate approach to not inhibit how and what companies assess and report, with the proviso that seven named factors are included.
Beyond the five mentioned above, quality of service and performance must also be assessed.
Companies have adopted various approaches to grading their performance, and it is the one factor on which boards have criticised some of their funds, calling for closer monitoring.
Otherwise, the vast majority of share classes for which boards have published an assessment thus far have been adjudged overall to offer value in the context of the charges levied.
Initial assessments of value have ticked a box, but there is an opportunity for asset managers to go further.
As we continue through the full reporting cycle over the next nine months, it will be interesting to see the FCA’s views on the first round of assessments and whether they issue further guidance, critiques or highlight particularly good practice.
Equally interesting will be whether any other national regulators in other countries emulate this innovation, or whether, having established the process for their UK funds, some companies elect to roll it out for some of their overseas funds, potentially giving them a unique selling point in other markets.
While the assessments of value are only required for UK-domiciled funds, the FCA, as part of its continuing Brexit preparations, is consulting on an overseas fund regime as a means to preserve the wide choice of foreign funds that UK investors have enjoyed as part of EU membership.
More broadly, HM Treasury is overseeing a review of the UK’s Future Regulatory Framework, specifically considering the issue of coordination between the various regulatory bodies.
A welcome near-term outcome is the Regulatory Initiatives Grid, published this month and updated twice a year thereafter.
It is a simple but potentially effective idea to provide an indicative two-year horizon of upcoming regulatory initiatives, designed to help companies plan ahead and regulators to stagger their work.