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FCA to review absolute return funds

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The FCA plans to include a review of absolute return funds in its asset management market study, according to reports.

The FT reports that the regulator is investigating absolute return funds amid poor performance and the flood of money to the strategies in recent years.

A spokesperson for the regulator told the newspaper: “We are looking at absolute return funds as part of the overall study.

“Across the market study we are looking to understand how competition works for asset management products and services.”

Two-thirds of absolute return funds have posted negative returns for this year, with the worst offenders down around 20 per cent since January, Morningstar reports.

Assets in UK-domiciled absolute return funds rose to a high of £59bn last year, its highest ever. The first six months of this year have seen another £5.3bn of inflows.

The FCA announced last November the terms of reference for the asset management review, aiming to establish whether competition is working in the industry and that investors are getting value for money.

A final report is due next year, with an interim report due in Q4 this year, delayed from the original Summer 2016 deadline.

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