Finanstilsynet, the Danish financial supervisory authority (FSA), is investigating a number of investment funds suspected of selling investors active fund management when in reality they are delivering a passively managed portfolio.
Actively-managed portfolios aim to perform better than benchmark indices through close monitoring by asset managers.
Almost a third not delivering
Anna Frost-Jensen, a department head at the FSA, explained in a press release that analysis of the ’active share’ and ’tracking error’ indicators allowed them to determine that 56 out of 188 investment fund departments, who they decreed were ostensibly offering active fund management, were in fact passive.
“This means that customers in these departments are paying for a product that is not being delivered: namely a genuine active management of their portfolio,” she said.
“On the background of this analysis, we will take a closer look at these departments. In this regard, after a concrete assessment we will demand an explanation of the individual departments’ strategies, including their justification for maintaining a high cost level for active management. This will happen on the basis of the law’s requirement that the board of directors acts in its members’ interests.”
Earlier this year, the FSA made recommendations that more investment funds offer passive management with lower costs.