About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   depositrates.co.nz  |   landlords.co.nz
Last Article Uploaded: Thursday, August 24th, 11:50AM
Check out GoodReturns TV now! Dismiss
rss
Latest Headlines

Managers struggle to find index to report against

An exemption is being proposed for fund managers who are unable to find a compliant market index to use when they communicate to clients how their funds have performed.

Wednesday, August 9th 2017, 6:00AM 3 Comments

by Susan Edmunds

The Financial Markets Conduct Act requires fund managers to include the return of a market index in their quarterly fund updates sent to investors, under the heading “how has the fund performed”. This allows investors to compare how their funds have performed, against the wider market.

The market index must be a "broad-based securities market index" that is "appropriate in terms of assessing movements in the market in relation to the returns from the assets in which the specified fund directly or indirectly invests".

But the FMA said, in the transition period to the FMCA, some managers reported finding it hard to comply with that requirements because there was no suitable market index available.

“We agree that that the market index requirement creates challenges for certain types of funds. In our view, the market index acts as a benchmark. Where managers are unable to find a compliant market index, we propose to allow managers to provide another form of benchmark (a peer group) as an alternative.”

The challenges have been most acute for funds with an allocation to alternative asset classes, or that follow an alternative investment strategy.

“Our preferred approach is to put in place a class exemption that would allow managers to use a peer group for part or all of a benchmark if they decide there is no available broad-based market index compliant with the FMC regulations," the FMA said.

"We view a peer group as a second-order benchmark, and propose that managers are only able to use the exemption after making reasonable efforts to find a compliant market index.”

Other options it has considered and wants feedback on include allowing managers to use an absolute return benchmark, to opt out of the market index requirement or to have flexibility to provide more than one benchmark.

Feedback is sought until September 1.

Tags: Financial Markets Conduct Act FMA funds management investment

« Law changes an imperfect improvementFinancial Advice NZ? Wait and see »

Special Offers

Comments from our readers

On 9 August 2017 at 8:18 am Brent Sheather said:
This headline looks very suspect and I wonder if the following words have been left off the headline “that they can beat”. The words “a compliant market index” also look dodgy. Let’s hope that the FMA doesn’t have the wool pulled over their eyes again. I regularly see funds being compared with inappropriate benchmarks. Is the FMA sufficiently resourced to police this area? The other day I saw a fund comparing its performance pre-fees. The FMA wasn’t aware of this bad behaviour until I told them.

My experience is that it is very easy to build a composite index against which to benchmark virtually any fund. All you need to do is look at the average asset allocation and build the index accordingly. That obviously goes for absolute return funds as well. Of course fund managers know this but they also know that “the easiest way to look tall is to stand by a short person”. Let’s hope the FMA doesn’t get scammed again.
On 9 August 2017 at 10:36 am Pragmatic said:
Agree with Brent. Advisors should run a mile from any claims that there are no "relevant benchmarks available". Simularly, the regulator should reinforce their monitoring of this requirement
On 10 August 2017 at 11:34 am R1 said:
Surely the FMA should have the capacity to understand the important points Brent has made here. It is not rocket science to develop a composite index for any fund knowing what it is trying to achieve and the asset classes it is investing in to this end. It is a real worry to think they could be conned into taking advice from fund managers on this topic, the FMA should be the experts.

Regarding the fund manager using pre-fee returns to compare their performance you would hope the FMA would make such behaviour a matter of public importance and disclose the fund manager and apply some sort of disciplinary action; 'yeah right'. Another wet bus ticket moment.

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • Industry demands details
    “Nominated representatives I also don't see why the sector is puzzled about the role of nominated representatives. All licensed...”
    1 day ago by Murray Weatherston
  • Industry demands details
    “I don't understand what the issue raised above about complaints and EDRS is. Under FSLAA, the licensee is the entity (FAP)....”
    1 day ago by Murray Weatherston
  • Former Navy captain to steer Newpark into the future
    “Great to see Newpark taking the early initiative as well as appointing someone with such obvious experience and business...”
    2 days ago by Donald
  • Former Navy captain to steer Newpark into the future
    “Congratulations Newpark on an awesome strategy! By appointing a "skipper" (pun intended) with Deans credentials, you are...”
    6 days ago by The Oracle
  • Getting to Know: Peter Neilson
    “Interesting article. Isn’t it good we do have some decent people in our industry. What a joke that was when all those...”
    6 days ago by Brent Sheather
Subscribe Now

Weekly Wrap

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.79 5.05 ▼5.25 5.59
ANZ Special - 4.55 ▼4.75 -
ASB Bank 5.80 4.85 5.19 5.49
ASB Bank Special - 4.45 4.79 5.09
BankDirect 5.80 4.85 5.19 5.49
BankDirect Special - 4.45 4.79 5.09
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.59 4.79 5.09
BNZ - Std, FlyBuys 5.90 4.99 5.29 5.59
BNZ - TotalMoney 5.90 - - -
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.15 5.45 5.50 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 5.00 5.20 -
Housing NZ Corp 5.79 4.85 5.24 5.49
HSBC Premier 5.79 4.09 4.29 4.89
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.80 4.59 4.69 5.09
Kiwibank 5.80 4.95 5.29 5.59
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.45 4.79 5.09
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.94 5.30
Lender Flt 1yr 2yr 3yr
RESIMAC Special 5.00 - 4.75 -
SBS Bank 5.89 4.99 5.29 5.59
SBS Bank Special - 4.59 4.85 5.25
Sovereign 5.90 4.85 5.19 5.49
Sovereign Special - 4.45 4.79 5.09
The Co-operative Bank - Owner Occ 5.75 4.59 ▼4.79 5.09
The Co-operative Bank - Standard 5.75 5.09 ▼5.29 5.59
TSB Bank 5.80 4.80 5.15 5.45
TSB Special - 4.55 4.79 4.99
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.95 4.99 ▼5.19 5.59
Lender Flt 1yr 2yr 3yr
Westpac - Capped rates - 5.26 5.36 -
Westpac - Offset 5.95 - - -
Westpac Special - 4.59 ▼4.79 5.09
Median 5.80 4.85 5.15 5.38

Last updated: 21 August 2017 10:06am

News Quiz

The maximum remuneration model for Australian life insurance advisers is to be set at what?

Upfront 40% + trail 20%

Upfront 50% + trail 10%

Upfront 50% + trail 20%

Upfront 60% + trail 10%

Upfront 60% + trail 20%

MORE QUIZZES »

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com