New research by Morningstar has shone fresh light on this long standing issue. The fund research specialist found one in every five equities funds in Europe falls short of the 60% minimum active share level generally considered acceptable when charging active management fees.
While everything is going up and European equities investors are seeing good returns as has been the case recently, people are far less inclined to delved into the active share details and ask tough questions of fund managers. With things taking a turn for the worst in the first two months of 2016 and many forecasters expecting a tough year in all equities markets, this may well change.
Then, with major research houses like Morningstar producing these kind of reports there will be increasingly smaller numbers of investors who are not fully aware of the issue or do not realise the inherently bad deal active funds which have very low active share levels are offering them.
The European Securities and Markets Authority has also recently raised the matter.
One other factor is the falling price of trackers, which has been squeezed down under 10 basis points in many cases by competition between the big providers.
This combination could create a much less tolerant environment for charging 70 basis points or more for a fund that looks remarkably like an index tracker.
Senior manager research analysts at Morningstar Mathieu Caquineau, Mattias Möttölä, and Jeffrey Schumacher looked at how active share has developed between 2005 and 2015. The basis was a universe of 456 European large-cap equities funds.
By the sounds of it, some fund groups realise that closet trackers are on borrowed time as the number while still high, has started to decline. Regulators are also looking more closely.