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ESMA warns against flawed product declaration on mutual funds

In a report, the European FSA ESMA warns that funds being sold as active are in reality passive.

Photo: Thomas Borberg

Actively managed investment funds are usually more expensive than passively managed funds, but now, the European Securities and Markets Authority (ESMA) warns against so-called closet indexing in a working paper, according to Danish business media Finans.

The term closet indexing, sometimes referred to as index hugging, refers to funds being marketed as actively managed funds, when in reality, they are close to the benchmark. Several Danish mutual funds may fall under this category.

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