In its official response to the FCA’s asset management study, the AIC also recommended fund managers should be required to look closer at whether their fund structure delivers the best outcome for investors based on its underlying assets and strategy.
Released last year, the FCA’s Asset Management Market study found active and passive funds often failed to outperform their benchmarks after charges, but the AIC’s response claimed investment companies offer a better deal.
Research by the AIC found 54% of investment companies outperformed their benchmark on the basis of NAV performance over ten years, while only 42% of open-ended funds beat their benchmark over the same time.
On the back of the data, the AIC has claimed the lack of investment companies recommended by IFAs is evidence of a ‘market failure’, noting the small share of the market investment companies have.
The report said: “Greater use of investment companies would increase competition across the asset management sector.
“The fact that they have not achieved greater market penetration with product providers and certain types of investors (notably IFAs) represents a market failure.
“The FCA’s intervention to increase competition in the asset management sector should consider options to remedy this situation.”
