View more on these topics

Envy — Imitating the index is the poorest form of flattery

By Mike Turner, Investment Solutions, Aberdeen Asset Management

This article expands upon the sixth of Mike Turner’s Seven Deadly Sins, which was first published in booklet form in January 2014.

When shopping for a product, you expect it to do what it says on the tin. The idea of ‘what you see is what you get’ is a central tenet of the unwritten contract between a firm and its customers. If you bought a pair of award-winning headphones and arrived home to find they did not play any bass, you would undoubtedly be frustrated and feel that you had been mis-sold. Unbeknown to many, something very similar is happening in parts of the active fund management world.

Traditionally, active funds — which are intended to achieve returns in excess of their benchmarks — charge higher fees than passive funds, which simply track an index or benchmark. The problem is that many of these supposedly ‘active’ funds are not active at all — they are essentially ‘benchmark-hugging’ funds or ‘closet trackers’. A recent study found that around one in three actively managed UK equity funds are closet trackers. These funds charge more than cheap passive trackers but have similar holdings and performance. In March 2015, Norwegian regulators became the first to order a bank to lower the fees on one of its active funds because performance was very close to the benchmark.

So how have closet trackers come about?



Osborne refuses UK contribution to Greece bailout

Chancellor George Osborne is to refuse the UK’s part in the new €86bn Greek bailout, saying it goes against a previous agreement of EU leaders in 2010. Downing Street is said to be angered by the most recent deal struck by European leaders on a Greek bailout, reports the FT, which would see the country’s contribution […]


Ex-James Hay boss Sargisson appointed Sandringham chief exec

National advice firm Sandringham Financial Partners has appointed former James Hay managing director Tim Sargisson as its new chief executive. Sargisson, who takes up the role from August, was previously chief executive at IFG Financial Services, the parent company of platform pension provider James Hay. Last month Sandringham appointed former Tenet chair Barry Kayes as […]


UK inflation drops to 0%

The UK saw CPI inflation drop to 0 per cent for June, down from 0.1 per cent in May but hovering just above deflation. The 12-month rate of 0 per cent shows that prices remained unchanged from the same month a year ago, according to Office for National Statistics figures. A drop in clothing and […]


Blind faith: Treasury under pressure to come clean on Pension Wise

The Treasury is facing mounting pressure from senior politicians, insurers and advisers over its refusal to publish data on the industry-funded guidance service Pension Wise. The Government’s guidance offering came into being shortly ahead of pension freedom on 6 April. But requests for basic information from Money Marketing on how the service is performing have repeatedly been […]

How can I help develop my professional connections?

Graeme Ballantyne, business consultancy manager, looks at how you can maximise the opportunities through your professional connections As we move through the summer months it’s perhaps a good time to pause and reflect on whether the plans you’ve made for your business are bearing fruit. One area we at PruConsulting know many advisers have been […]


News and expert analysis straight to your inbox

Sign up

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm