The FCA’s report on the asset management industry in 2017 stated that there was £109 billion invested in so-called closer tracker funds. So the news announced in early March 2018 that the FCA has ordered 64 of the 84 fund managers it has investigated to change its marketing literature comes as no surprise. What is of great concern is that the reported £34m refunded to investors by these companies is but one small drop in the ocean.
However, the FCA’s refusal to immediately name these fund managers is an indictment of the regulator’s responsibility to be transparent and report such malpractice. It really should be more a case of name them and shame them. Instead it appears to be no more than a light reprimand. It is very much the latest in a long line of lenient reprimands on an industry that has sold investors short for decades. Shameful in fact.
So what is a closet tracker fund? Basically it is an active fund which is keeping up a pretence that it is managing your money proactively, by researching heavily and investing in resources in order to obtain better returns than the market generally. This is extra Return is known as Alpha. Index tracker funds on the other hand simply invest in the shares that form the constituents of that index. So a FTSE 100 Index tracker fund simply invests in the 100 companies that make up the index. Because there is no fund management as such these tracker funds or passive funds have much lower charges.
The big problem here is that closet tracker funds are pretending to be active rather than passive, charging typically 1% a year more than passive funds yet not doing any more work for the money. So such fund managers’ practices are totally misleading and fundamentally dishonest. It is quite frankly an absolute scandal. It’s what gives financial services and fund management in particular a bad name. It is undoubtedly the FCA’s responsibility to come down hard on the offenders to show them that they mean business. This will stamp out such malpractice overnight. Unfortunately the FCA is lacking such boldness which doesn’t put the regulator in a good light at all.
If the FCA were to focus on a real scandal like this rather than the so called PPI misselling scandal we might then have a regulator to be reckoned with, one with teeth, one that would give ordinary consumers true belief that their interests are being really looked after. Such weak action by the FCA continues to undermine consumers’ trust in financial services which is a great pity especially since consumers will increasingly need financial advice in the future as the welfare state recedes. It will become less able to support them meaning that individuals will need to become more and more financially self-sufficient and self-reliant.
If you would like to invest in a truly active fund with a company you can trust why not invest in the CCM Intelligent Wealth Fund? You know it makes sense.
However, the FCA’s refusal to immediately name these fund managers is an indictment of the regulator’s responsibility to be transparent and report such malpractice. It really should be more a case of name them and shame them. Instead it appears to be no more than a light reprimand. It is very much the latest in a long line of lenient reprimands on an industry that has sold investors short for decades. Shameful in fact.
So what is a closet tracker fund? Basically it is an active fund which is keeping up a pretence that it is managing your money proactively, by researching heavily and investing in resources in order to obtain better returns than the market generally. This is extra Return is known as Alpha. Index tracker funds on the other hand simply invest in the shares that form the constituents of that index. So a FTSE 100 Index tracker fund simply invests in the 100 companies that make up the index. Because there is no fund management as such these tracker funds or passive funds have much lower charges.
The big problem here is that closet tracker funds are pretending to be active rather than passive, charging typically 1% a year more than passive funds yet not doing any more work for the money. So such fund managers’ practices are totally misleading and fundamentally dishonest. It is quite frankly an absolute scandal. It’s what gives financial services and fund management in particular a bad name. It is undoubtedly the FCA’s responsibility to come down hard on the offenders to show them that they mean business. This will stamp out such malpractice overnight. Unfortunately the FCA is lacking such boldness which doesn’t put the regulator in a good light at all.
If the FCA were to focus on a real scandal like this rather than the so called PPI misselling scandal we might then have a regulator to be reckoned with, one with teeth, one that would give ordinary consumers true belief that their interests are being really looked after. Such weak action by the FCA continues to undermine consumers’ trust in financial services which is a great pity especially since consumers will increasingly need financial advice in the future as the welfare state recedes. It will become less able to support them meaning that individuals will need to become more and more financially self-sufficient and self-reliant.
If you would like to invest in a truly active fund with a company you can trust why not invest in the CCM Intelligent Wealth Fund? You know it makes sense.
