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Benchmark huggers? Not in Luxembourg, claims regulator

Eighteen months after the European Securities and Markets Authority (Esma) published a report saying that up to 15% of active European-domiciled funds could actually be index huggers, Luxembourg’s regulator only identified one such fund among the more than 4100 UCITS vehicles domiciled in the Grand Duchy: that’s about 0.00024%….

“The CSSF (Commission de Surveillance du Secteur Financier) could not identify any UCITS qualifying as closet index tracker (…) except for one isolated case,” the regulator said, stopping short of naming this single sinner fund.

Luxembourg’s regulator also admitted it identified “some funds” that apparently didn’t use a benchmark. Though Luxembourg’s regulator could simply have applied a commonly used benchmark to these funds which would probably have resulted in the identification of many more closet tracking funds, it instead “asked the concerned management companies to increase the level of information disclosed in the key investor information document (KIID) and the sales prospectus.”

Consumer finance organisation BETTER FINANCE condemned the CSSF report as ‘disappointing’ and ‘weak’, as the regulator did not disclose its definition of closet indexing, “which must differ from the one used by Better Finance and Esma.”

Part of the Bonhill Group.