Implementation of the Investment Management Association's portfolio disclosure proposals could make it difficult to manage funds of funds because information on the underlying holdings of funds would be restricted, say managers.
The IMA, which is aware of the potential problem, says all investors should have access to the same portfolio information at the same time delay. It says this is because real-time data could be used in market timing, which disrupts markets and can increase the cost of buying or selling shares.
Market timing can take place where an investor knows a fund's dealing price does not reflect the most recent market information or where short-term trading positions are taken on the direction of the markets.
But making the same level of information available to all investors could increase costs, meaning that fund managers could decide to publish portfolio details less frequently. Fund of funds managers are concerned that if this happens, it will be more difficult to assess risk and make asset allocation decisions as these would be based on outdated information.
F&C Asset Management director, head of communications & strategy Jason Hollands says: “Different levels of transparencies are suitable for different types of investor. I think the important thing in terms of preventing market time abuse is monitoring suspicious trading activity when you get large trades and applying dilution levies.”
Abbey head of client investment and multi-manager development John Kelly says: “Using a fund of funds means information is always historical and all you can do is minimise the gap. What these people are arguing about is one of the reasons we chose to have direct contracts with fund managers rather than a fund of funds.”