Skip to content
Thomson Reuters
Asset Management

Should mutual funds do more to boost transparency?

Detlef Glow

05 Oct 2017

Jellyfishes swim in an aquarium of the Monaco oceanographic museum March 3, 2011. Prince Albert II of Monaco and his fiancee Charlene Wittstock will celebrate the gala diner at the oceanographic museum of Monaco following their wedding on July 2, 2011. Photography: Eric Gaillard
Photography: Eric Gaillard

Some mutual funds are failing investors by not making their asset management holdings as transparent as possible, says Detlef Glow, Head of EMEA Research at Thomson Reuters Lipper.

Even though investors and regulators want to know as many details as possible about the holdings of mutual funds, the fund industry — especially in Europe — tries to hold back as much information as possible.

Discover how Thomson Reuters Eikon provides easy access to trusted news, data, and analytics

From my point of view, it is in the best interest of investors to see the full holdings of funds and not only the allocation at the level of sectors and regions.

Investors want to be able to estimate the risk/return profile of the holdings in their portfolios.

I do not say this very often, but when it comes to regulatory policies, the interest by regulators in the full holdings — as expressed by the launch of the Solvency II regulation — is understandable.

News on Thomson Reuters Eikon: European Mutual Funds
News on Thomson Reuters Eikon: European Mutual Funds

Discover how Thomson Reuters Eikon provides easy access to trusted news, data, and analytics

Competitive advantage

While mutual funds are in some regard far more transparent than other investment vehicles, they are still not transparent enough from my perspective.

I don’t understand why the industry isn’t using a high level of transparency as a competitive advantage over other long-term investment products such as life insurance or other pension products, which are more or less black boxes.

Not all the fund industry tries to sell black boxes to investors.

Some asset managers are quite progressive about transparency and publish the full holdings of their funds day by day on their web pages.

Others do so on a monthly basis, or at least they deliver the holdings data very frequently to data vendors such as Thomson Reuters Lipper, in order to have their holdings published in fund analysis tools.

In contrast, a number of asset managers disclose the full holdings of their funds to the public only when they publish their annual and semi-annual reports.

Watch video — The evolution of Lipper from its inception to the present day

Discover more about Thomson Reuters Lipper, the global leader in independent fund performance data

Investor treatment

Managers will claim that the holdings of funds are the outcome of their research and therefore their intellectual property (which needs to be protected from being copied by their competitors).

They do publish their full holdings more frequently to large semi-institutional investors and, of course, to institutions that need to look at the full holdings as per regulations, such as insurance companies under the Solvency II regulation.

Lipper Alpha Insight taps into Thomson Reuters content to deliver investment insight, helping investors identify trends in global financial markets
Lipper Alpha Insight taps into Thomson Reuters content to deliver investment insight, helping investors identify trends in global financial markets

It is hard for me to accept that smaller investors are treated differently than large investors when it comes to disclosure of the full holdings of a mutual fund.

With regard to this, it is interesting to follow the current discussion around active ETFs, since market participants claim that the lack of ‘real’ actively managed ETFs in Europe is caused by the need to deliver the full holdings to the respective liquidity providers, i.e., to market makers and authorized participants of the fund.

Get the weekly analysis on the funds market by signing up to our Funds Weekly Newsletter

Clash of cultures

I am quite curious to see where this discussion ends, since some ETF promoters have claimed in the past that the “T” in ETF stands for transparency.

This might end in a clash of cultures in the ETF industry.

But when it comes to investors, I am fairly sure I know which part of the industry will win the race for assets.

Get an overview of the funds market in Thomson Reuters Eikon
Get an overview of the funds market in Thomson Reuters Eikon

Discover how Thomson Reuters Eikon provides easy access to trusted news, data, and analytics

Since the pressure on asset managers to publish the full holdings of their funds is increasing, I am fairly sure the fund industry will at some point agree to this level of transparency.

Otherwise, investors may no longer invest in the funds, or regulators will force the industry to publish the holdings.

Even the smallest shareholder has the right to know what he or she is holding in their portfolio.

Find out more about the Thomson Reuters Lipper – European Alpha Expert Forum 2017

The views expressed are the views of the author, not necessarily those of Thomson Reuters.

Thomson Reuters Eikon

KYC onboarding still a pain point for financial institutions Are buy-side firms ready for MiFID II? Demonstrating the value of an open platform approach Eikon App Studio: 3 highlights for October Datastream at 50: still the best tool for macro research Beyond MiFID II: how to secure competitive advantage Publishing to APAs: what’s the MiFID II solution? Commodity derivatives: New indices opening up to Indian investors Why great data needs a quality enterprise platform Best execution: what role do FX algos play?