Response to the announcement that the FSA is to investigate financial losses from Absolute Return Funds
Responding to the announcement that the FSA is to investigate financial losses from Absolute Return Funds, Alan Miller, co-founder and CIO at investment manager SCM Private states:
“We have been calling for the mis-labelling of Absolute Return funds to be investigated for the past two years and we are delighted that the FSA has finally started to address this.
“The current IMA label does little to avoid mis-leading consumers and it claims that Absolute Return funds will aim to achieve positive 12 monthly returns in ALL market conditions. This is yet another example of how the IMA has been ignoring consumers’ best interests and does little to encourage consumer confidence in the products they are buying.
“Absolute Return funds are not transparent, net return figures conceal a host of fees and performance charges that prevent investors from making informed decisions. We doubt absolute return investors really understand how the combination of high performance fees and other costs savage their investments. Research undertaken by SCM Private as far back as December 2009 showed that up to 55% of underlying performance from Absolute Return funds can be extracted through various fees and charges.
“The financial services industry continues to be hit by accusations of mis-selling, mal-practice and corrupt behaviour. It is high-time that the industry ends these self-serving anomalies and puts transparency and consumer protection at the heart of everything it does. That is why SCM Private launched the True and Fair campaign, calling for 100% transparency on fund fees and charges, as well as full disclosure on holdings.
“As we approach the introduction of RDR, it is absolutely critical that investment products are accurately classified to ensure that consumers understand the risks, fees and charges and are not misled, by a blatantly misleading objective, into buying products in the belief that their original investment is protected. Although the IMA conceded that fund labels need addressing at the beginning of 2012 no action has yet been taken. The FSA needs to urgently address the issue of fund labelling and ensure these critical powers are given to a consumer-focused, independent body, not left with the IMA.”
Posted By: True and Fair, 1:37 pm