Jackie Beard, director of manager research services for Morningstar, said a combination of complacency among asset managers and investor inertia is prolonging the life of funds that are no longer relevant for today’s investors.
She said the number of fund share classes available for sale in Europe has grown at an “exponential rate” in the last decade and called for “prompt action” on some of the long-established funds that have “lost their way”.
Beard said the introduction of Mifid II on 3 January 2018 will push investment firms to regularly review products and identify those which are no longer fit for purpose.
According to Beard, asset managers need to ask themselves three questions: Is every fund in their line-up relevant? Are they priced competitively? Does the firm have the right skill set and expertise to manage these funds well?
“Asset managers will need to ensure that their products function as intended to avoid any potentially detrimental consequences for investors,” she added.
“Not only do investment firms need to carry out these checks, they must prove that they’re doing so and evidence this with an audit trail.”
