UK’s Financial Conduct Authority (FCA) has called on asset managers to review the way they distribute their funds.
The concerns were highlighted following a review by the FCA into whether UK investment funds operated in line with investors’ expectations, and how they monitored the appropriate distribution of funds. The review looked at 19 asset managers and 23 actively managed funds.
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Overall, the watchdog found that fund managers are taking appropriate measures to meet investors’ expectations.
However, it also found misleading marketing materials and unclear product descriptions at seven of the funds reviewed.
It also found that some funds were not unable to explain that their strategy was not totally active, but partially based on following a benchmark.
The regulator added that three actively managed equity funds reviewed were "following enhanced index strategies without adequately disclosing this."
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By GlobalDataFCA director of supervision – investment, wholesale and specialists -Megan Butler said: "Firms are generally managing funds as they say they will. In most circumstances they are clear about how they are going to invest and have the correct level of oversight to ensure practice follows promise.
"However, the industry needs to consider how it communicates when funds are linked to financial benchmarks. It is also vital that funds keep investment practices under review so they match their stated aims and strategy, irrespective of whether the fund is still actively marketed, because investors base their decisions on this information."
