EU regulator clamps down on 'closet' trackers; Considers rethink of active/passive definitions

Surveyed over 2,000 funds

Laura Dew
clock • 3 min read

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, meaning as many as 4,350 could be affected. The decision on whether a fund was a 'closet indexer' was made using 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 o...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Investment

Pensions tax breaks: Budget 'kite-flying' creating cash management challenge

Pensions tax breaks: Budget 'kite-flying' creating cash management challenge

Savers and advisers dealing with cash management quandary

Kate Toumazi
clock 14 October 2025 • 3 min read
Partner Insight: Finding the right partner for a managed portfolio service

Partner Insight: Finding the right partner for a managed portfolio service

Francis Clark Financial Planning set up a white-label managed portfolio service for their clients, but as the effects of COVID-19 played out and markets stagnated, they realised they needed a change. Managing Director Chris Reah explains how they found the right solution.

Chris Reah, Francis Clark Financial Planning
clock 13 October 2025 • 5 min read
Watch Professional Adviser's Working Lunch with Baillie Gifford - Decumulation Decisions: Resilient Monthly Income for Retirees

Watch Professional Adviser's Working Lunch with Baillie Gifford - Decumulation Decisions: Resilient Monthly Income for Retirees

Catch up on the discussion

Professional Adviser
clock 10 October 2025 • 1 min read