FCA publishes new rules for fund managers

Written by Oliver Wade

The Financial Conduct Authority (FCA) yesterday published new rules and guidance to improve the quality of the information available to consumers about the funds they invest in.

The regulator reported that its asset management market study revealed evidence of weak price competition in many areas of the asset management industry, resulting in lower returns for savers, pensioners and other investors.

Over £1trn is managed for individual investors, while £3trn is managed on behalf of UK pension funds and other institutional investors.

In April 2018, the FCA introduced new rules to ensure fund managers act as agents of investors in their funds, with today’s rules and guidance designed to complement the work carried out then by helping consumers gain a more comprehensive understanding on how their money is being managed, therefore allowing them to make better investment decisions.

The new rules set out how managers should describe fund objectives and investment policies to make them more useful to investors, while requiring fund managers to explain why and how their funds use particular benchmarks. If benchmarks are not used, the guidance states that fund managers must advise investors on how they assess the performance of a fund.

Furthermore, fund managers must clarify that, where a performance fee is specified in the prospectus, it must be calculated based on the scheme’s performance after the deduction of all other fees.

Commenting, FCA executive director of strategy and competition Christopher Woolard said: “We’re working to make competition work better in the asset management market and protect those least able to actively engage with their investments.

"Today’s remedies build on those we’ve already introduced and will make it easier for investors to choose the best fund for them and help them achieve their investment objectives.”

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