While firms are “generally taking the right steps” in managing funds according to the stated strategy, the FCA said it has found “examples of unclear product descriptions and inadequate governance or oversight”.
“Firms are generally managing funds as they say they will,” said Megan Butler, FCA director of supervision – investment, wholesale and specialists. “In most circumstances they are clear about how they are going to invest and have the correct level of oversight to ensure practice follows promise.”
“However, the industry needs to consider how it communicates when funds are linked to financial benchmarks,” Butler continued. “It is also vital that funds keep investment practices under review so they match their stated aims and strategy, irrespective of whether the fund is still actively marketed, because investors base their decisions on this information.”
Shortcomings
The FCA review covered 19 UK fund management firms responsible for 23 UK authorised funds and four segregated mandates.
An example of the shortcomings the FCA said it found was a failure to disclose a constrained investment strategy, and a case were there was jargon used that ordinary investors would be unlikely to understand.
The regulator implored fund management firms to consider the findings and “review their arrangements accordingly.”
More information is available on the FCA website
