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

Party politics: Why investors should celebrate AIM's 30th birthday, even if the government won't

Party politics: Why investors should celebrate AIM's 30th birthday, even if the government won't

AIM has helped 4,000 businesses raise £135bn since launch

Eustace Santa Barbara
clock 19 June 2025 • 4 min read
AIM at 30: Why advisers should take a fresh look at the UK's junior market

AIM at 30: Why advisers should take a fresh look at the UK's junior market

'We see AIM as a jewel in the crown with long-term appeal for the right clients'

Oliver Brown
clock 17 June 2025 • 4 min read
Taking the rough with the smooth: How to navigate global market volatility

Taking the rough with the smooth: How to navigate global market volatility

'Like investing, smoothing isn't one-size-fits-all'

James Tothill
clock 13 June 2025 • 4 min read