SCM Private has criticised inconsistent portfolio disclosure across different regions by US fund managers with UK retail funds and warned that absolute return funds could be the next misselling scandal.
Last month, SCM Private launched a new code of conduct to tackle fund fee transparency after suggesting investors are being hit with over £18bn of “hidden” dealing costs each year.
The firm, led by former New Star chief investment officer Alan Miller, says the True and Fair Code and Labelling Scheme will force the savings and investment industry to adopt 100 per cent transparency of fees and investments.
In a full research report published by the firm today, SCM founding partner Gina Miller says that many of the largest US fund management companies seem to operate with different levels of portfolio disclosure according to the particular region in which they operate, rather than apply the same standards worldwide.
The report cites Fidelity and BlackRock as examples of inconsistent portfolio disclosure.
Miller said: “The Fidelity (US) £8.2bn magellan fund publishes 100 per cent of its holdings online on a monthly basis. The latest date being December 31, 2011. However, UK investors in the £2.2bn Fidelity UK special situations fund can currently see just 44 per cent of their portfolios online, via the latest monthly factsheet. The latest full portfolio for this UK fund is revealed in its annual report and accounts, February 28 2011.”
She added: “Similarly, the BlackRock (US) £12.2bn equity dividend fund provides 100 per cent of its portfolio online quarterly, the latest date being October 31, 2011. Meanwhile, in the UK, the BlackRock UK special situations fund reveals its full portfolio annually via its report and accounts, the latest date being April 20, 2011. Its latest monthly factsheet reveals just its top 10 holdings accounting for 42 per cent of the fund.”
The report advocates the system adopted by the US in 2004. The system requires all funds to file their complete holdings online on a quarterly basis.
Miller also warned against a potential misselling crisis in absolute return funds.
She said: “Despite repeated adverse press and industry comments associated with this promise of the impossible in absolute return, changes to these funds objective through the current IMA sector review are scheduled to take 18 months to complete.”
She continued: “There is a real possibility that the mislabelling by the IMA could result in a misselling scandal of the £21bn absolute return sector. This needs to be reviewed immediately.”