IRELAND: Central Bank of Ireland Publishes Thematic Review of Closet Indexing

Wednesday July 24 2019

On 23^rd July 2019, the Central Bank of Ireland published the outcome of a review of UCITS funds on the subject of closet indexing.

The review is the largest data driven thematic review of the funds industry to date.

Detailed analysis was carried out on all of the 2,550 Irish authorised UCITS funds classified as actively managed as at March 2018.

Key findings from the Review included:

• Investors were not always given sufficient or accurate information about the UCITS’s investment strategy in the Prospectus and KIID, to enable informed decision making on whether to invest in the UCITS.
• The Central Bank also found cases of poor governance and controls by Boards of UCITS Fund Management Companies.
• The Central Bank found cases where multi-manager UCITS consistently delivered a performance similar to an index.
• Cases were identified where the UCITS have a target outperformance against a benchmark that is less than the fee changed to certain share classes in the UCITS.
• Finally, the Central Bank found cases where the past performance section of the KIID did not include relevant benchmark disclosure.

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