Wealth managers warn over-regulation of 'closet trackers' may not solve Europe-wide problem

Issue raised by ESMA last week

Industry commentators have told EU regulators that over-policing the issue of identifying 'closet trackers' may not deliver the desired outcome for investors.

They say a broad-brush approach could risk unfairly penalising some portfolios, while pushing certain fund managers to raise their active share levels to the detriment of performance at specific points in the market cycle. Debate on how to deal with 'closet trackers', or funds which charge an active fee but hug an index, was reignited last week after the European Securities and Markets Authority (ESMA) called for further investigation on the subject by national watchdogs. It raised concerns after conducting a study which found of 2,600 EU UCITS funds assessed over 2012-2014, around 5%...