A significant proportion of fund boards’ assessment of value reports are not up to scratch, according to CFA UK, with reporting on risk, liquidity and ESG factors largely missing.
Analysis by the industry body found that of the 145 UK investment firms targeted, the standard of the reports varied significantly and many failed to meet the requirements of both investors and the FCA.
“Many of the reports being published fail to provide the quality and completeness of information needed to advance investor appreciation of their current and potential fund investments,” said CFA UK professionalism advisor Andrew Burton.
He added: “The rationale behind making these reports obligatory was to increase transparency about fund performance and value for investors.”
Performance details ‘relatively meaningless’
More than two-fifths of reports failed to state the ongoing charges figures at individual fund level – key information for retail investors. Additionally, 58% did not quantify over- and underperformance, making many of the net performance details relatively meaningless for investors.
They also neglected to provide other useful information for investors. More than three quarters of the reports made no reference to ESG or how/if value was being provided in this area, 62% neglected to mention risk and 87% declined to comment on liquidity.
Three quarters of value assessments not easily located
CFA UK found that the reports were not easily available to investors. The working group was only able to locate 75% of the target reports, despite multiple efforts by phone and email to the firms in question.
Assessment of value reports were introduced by the FCA to combat weak price competition and high fees. The reports should include information such as costs and charges, risk and return and quality and service. They were designed to ensure regular dialogue between firms and clients and to reinforce the investment firm’s commitment to deliver.
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However, a handful of reports scored very well across the five FCA costs and charges related categories, despite this being a weak area generally.
“We should regroup as a profession to identify a clearer set of recommended practices that funds boards can use when compiling these reports. These recommendations should be developed based on good practice and with support from the FCA,” said CFA UK chief executive Will Goodhart.
