18th July 2019

CBI Thematic Review of Closet Indexing

The key findings of the review include:

1. Investors were not always given sufficient or accurate information about the fund’s investment strategy in the Prospectus and KIID that affects their ability to make an informed decision on whether to invest in the fund.
2. Instances of poor governance and controls by Boards.
3. Instances where the fund had a target outperformance against an index that is less than the fee charged to certain share classes in the fund. The result is that even if the UCITS provides a return at the upper end of its projections, investors in these share classes will not realise a positive return against the benchmark, as the fee charged will cancel out any outperformance achieved.
4. In some cases, in the past performance section of the KIID no comparator was included so that investors in these funds were not able to determine whether the fund, irrespective of performance, represented good value relative to its benchmark.

CLICK HERE to review the letter sent by the Central Bank of Ireland in relation to the outcome of its review of UCITS funds on the subject of closet indexing.