In 2014, BETTER FINANCE, had asked ESMA to carry out an EU-wide investigation on closet indexing. At the beginning of February 2016, ESMA eventually released results of its investigation but failed to disclose those funds that were uncovered by its investigation as potentially falsely active.
BETTER FINANCE therefore decided to replicate the research by ESMA and disclose the findings and the full list of funds on the 12th of February 2017.
Financial Times studied the results of BETTER FINANCE’s study on Closet Indexing and contacted investment funds who are named in the list of “potential closet indexers”. Some of them denied BETTER FINANCE’s findings whereas others challenged the data used by BETTER FINANCE or assured that their products ensure high returns for the level of risk.
This phenomenon of Closet indexing has been pointed out by academics and investors right organizations in Europe. Financial Times contacted Gina Miller (co-head of SCM Private) who said “We have been shouting about the scandal of closet index tracking, which is plainly mis-selling, for years, so I am delighted to see BETTER FINANCE naming and shaming the worst offenders.”
Consult BETTER FINANCE study (Press release and Annexes ) here
Read Financial Times article here
Read Funds Europe article here