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Alternative Market Briefing

French regulator eyes closet indexers

Wednesday, July 18, 2018

Bailey McCann, Opalesque New York:

French and European Union financial regulators are keeping a close eye on closet indexers. Speaking at the recent Opalesque France Roundtable, Vanessa Casano, Deputy Head of the Asset Management Regulation Division at Autorité des Marchés Financiers (AMF) says that closet indexing, as well as the growing number of assets in passive strategies, remain key areas of focus.

Closet indexers are funds that market themselves as active funds and charge active management fees, but in fact, have limited active share and instead track closely with their benchmark index. In 2016, ESMA established a framework for analyzing potential closet index funds in terms of their overall active share as well as the management fee. According to Casano, in the coming months, ESMA and local regulators are likely to get together for a workshop to share best practices for how to track closet indexers.

In June, investor advocacy group Better Finance released a report accusing as many as a third of Europe's large equity funds of being closet trackers. The report builds on a growing set of funds data implicating brand name firms including Fidelity International, Janus Henderson, and Standard Life Aberdeen.

The growing number of investor assets going into passive investment vehicles is also under scrutiny. "The increased proportion of passive asset managemen......................

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