Dáil Éireann Debate, Tuesday - 15 January 2019
198. Deputy Joan Burton asked the Minister for Finance his views on closet indexing which is subject to investigation of 2,000 Irish investment funds in view of the fact that the European Securities Market Authority has indicated between 5% and 15% of UCITs could be closet indexers. [54498/18]
Amharc ar fhreagraThe Central Bank of Ireland is the competent authority for authorising and supervising UCITS funds in Ireland.
I have been informed by the Bank that in Q4 2018 it began key supervisory work to review all Irish domiciled UCITS funds that report to be actively managed to determine if they are potentially index tracking.
ESMA has defined closet indexing as the situation ‘whereby asset managers claim, according to their fund rules and investor information documentation, to manage their funds in an active manner while the funds are, in fact, staying very close to a benchmark and therefore implementing an investment strategy which requires less input from the investment manager and charge management fees in line with those of funds that are considered to be actively managed. ’
The Central Bank investigation of 2,000 Irish investment funds is to ensure that investors are not misled or misinformed about the investment objectives, policies and charges set out in fund documentation.
The Central Bank’s supervisory work on potential closet indexing takes into account the work and methodology developed by ESMA, which the Bank has contributed to, and the findings in its study.
It is important that any issues identified by the Bank in their investigation of these 2,000 Irish investment funds are dealt with appropriately in order to ensure that investors are treated fairly.
To that end, the Bank has informed me that they will be following-up with any relevant funds identified in the review as potential ‘closet indexing’ funds, up to and including the use of the Central Bank’s full suite of supervisory powers depending on the nature of the findings.
