The European Securities and Markets Authority (ESMA) has found up to 15% of UCITS equity funds examined could be 'closet' index funds, and has called for further investigation by national regulators.
It surveyed 2,600 EU UCITS funds over the period 2012-2014 to assess how much of their portfolios coincided with the index, and found 5%-15% of equity vehicles could be described as 'closet indexers'. There are around 29,000 UCITS funds in the EU. The decision over whether a fund was a 'closet indexer' was decided by a number of factors including assessing the percentage of a portfolio that does not coincide with the underlying equity benchmark. ESMA found 15% of equity funds surveyed had an active share of under 60%, and a tracking error of less than 4%. In order to take into account...
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