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Closet trackers: FCA reminder on transparency and treating customers fairly

The Financial Conduct Authority (FCA) has reminded firms about the importance of treating customers fairly (TCF) in the world of passive investing, by fining Henderson Investment Funds approximately £1.9m for TCF failings. 

Fund managers will already be aware of the FCA’s ongoing concerns around so-called "closet trackers" (passively managed funds that look and charge like active funds), so this FCA fine is a clear warning message to the industry that: 

  1. investors must receive value for money and management fees must be commensurate with services provided; and 
  2. generally institutional investors should not be treated differently to retail investors.
Retail customers were essentially overcharged by almost £1.8m in fees by Henderson Investment Funds when it failed to inform them it was reducing the amount of active management of its Japanese and North American funds, the FCA said on Wednesday. The investment house, which has since merged with US asset manager Janus, took nearly five years to let customers know they were being charged management fees for what amounted to a tracker fund, the FCA said.


investment management, financial services, fca, institutional asset managers, regulated funds and ucits