Asset managers have a long way to go until their fund objectives become fully useful, clear and consistent for investors, according to industry figures.
Stipulating that benchmarks used for funds must be relevant, the Financial Conduct Authority (FCA) also told asset managers last February they must aim for more clarity and consistency in their fund objectives.
In its Asset Management Market Study, the FCA "found that objectives are not always as clear and helpful to consumers as they could be".
The regulator urged asset managers "to explain what their funds are doing in consumer-friendly language".
"Clear and helpful objectives should mean better-informed consumers making decisions to invest in funds that are more suited to their individual needs and expectations," it said.
As a result, some fund management companies have been rewriting the objectives used on their fund factsheets.
However, commentators believe more work is needed to improve even the newly stated objectives.
Paul Angell, investment research analyst at Square Mile Investment Consulting and Research, said every fund should have a clear objective around what they are looking to achieve either against a benchmark or from a total return perspective.
For instance, Angell suggested, 'this fund is targeting the FTSE All-Share index plus 2% over five years'.
"That way, investors can understand what they could expect from a fund and hold managers to account better by looking back at returns over time versus that objective," he said.
"The issue we are still seeing is providers saying 'the fund aims to maximise total return with a combination of income and capital growth'. I am not sure that has been overcome in this round."
James Budden, director of marketing and distribution at Baillie Gifford agreed, noting that the Edinburgh-based firm's new objectives had put onerous targets upon its fund managers.
The objective of the Baillie Gifford American fund, for example, is almost 100 words long. Further, it has an explicit target: to outperform (after deduction of costs) the S&P 500 index, as stated in sterling, by at least 1.5% per annum over rolling five-year periods.
"We have ended up setting ourselves quite a high bar," Budden said. "We were happy to back ourselves to do this and we felt that in the long run this was a good thing, because it gave investors an idea of what we are trying to achieve."
Rathbone Investment Management CEO Mike Webb said his firm took the opportunity presented by the benchmark and assessment of value report requirements to "make our objectives as clear as we felt we could make them".
"We undertook a pretty major review of all the funds to make sure there was: a target objective against which we would be able to report in the future; a reasonable time horizon and that we tried to explain it in as clear English as we could," Webb explained.
"It is not the perfect panacea, but we felt that by setting those targets more clearly, we would have a better framework for our value assessments."
Again, its Global Opportunities fund's new objective is more than 100 words long, noting the fund aims "to deliver a greater total return than the Investment Association Global Sector, after fees, over any five-year period".
Square Mile's Angell said the objective of Threadneedle's High Yield Bond fund was "perfect", containing "a clear reference index, a clear time period and whether net or gross of fees".
Similarly, he praised the BNY Mellon Global Dynamic Bond fund.
But others have not been as ambitious in targeting specific outperformance, with Baillie Gifford's Budden bemoaning that the group had "interpreted things in one way and almost the rest of the industry has decided to interpret it slightly differently, but we are all right according to the FCA".
"We have been somewhat surprised to see that we are pretty lonely in publishing a target benchmark with a sense of outperformance; it seems most other people in the industry have just stuck to a comparative index with no suggestion of actually outperforming it by x, y or z", he continued.
"From an industry perspective, I think it is pretty helpful that investors can see what funds are trying to do. If you just put in, say, the FTSE 100, that is kind of what tracker funds do.
"If you are an active manager, there should be some element of outperformance mentioned."
Interestingly, Angell noted, passive funds have tended to be better than active funds on implementing specific objectives.
"All the passive funds pretty much say that they seek to track the performance of a specific benchmark, which is obviously what passive funds do," he said.
"From our perspective as fund selectors that is great because that gives us a clear objective to look at the funds' returns against and to consider future performance against."
But Adrian Hull, head of fixed income at Kames Capital, noted the argument was more nuanced and defended the one-line objective on its Strategic Bond fund factsheets, which is 'to provide a combination of income and capital growth over any seven-year period'.
In contrast, for example, its Allianz Strategic Bond competitor's objective contains 78 words.
Hull said: "If that is all you are looking at then yes [it] would be right [that it is providing less information]. The reality, is we have no expectation that people will go and invest in the funds solely on that one-line sentence."
Hull added that what the fund was trying to achieve would become clear in client engagement, marketing documents, presentations and face-to-face meetings.
"We do not have a retail presence; we are looking to sell to wholesale providers - the Hargreaves Lansdowns through to the Investecs. There is a lot of interaction before you are actually accepted because they are the intermediaries."
Webb agreed, adding: "I would warn that just reading the investment objective will not give you a sense of what the fund is capable of doing, both good and bad."
The general expectation is that objectives will continue to be refined, in conjunction with the FCA, who declined to comment.