Some of the largest shops in the $16 trillion US mutual fund industry have agreed to publish active share metrics for their actively-managed equity funds after an investigation conducted by the Investor Protection Bureau of the Office of the New York Attorney General (NYOAG) found that many retail investors do not have access to this information.
The 13 firms that have agreed to share such information for their relevant funds on their websites on a quarterly basis are: AllianceBernstein, BlackRock, The Dreyfus Corporation, The Capital Group Companies (American Funds), Columbia Management Investment Advisors, Eaton Vance Management, Goldman Sachs Asset Management, JP Morgan Chase, OppenheimerFunds, Nuveen, T. Rowe Price, USAA and Vanguard.
NYOAG surveyed 2,000 mutual funds' fees, disclosures and other practices from the 14 firms. Besides the 13 firms that have agreed to disclose active share information, the 14th firm surveyed - Fidelity Management & Research Company, was already publishing active share information for its relevant funds.
The firms will begin to publish the disclosures in an effort to help retail investors determine whether higher-cost, actively managed mutual funds will fit their investment goals better than lower-cost passive alternatives in the beginning of spring 2018. The disclosures will affect 400 actively managed mutual funds.
NYOAG has also called on all mutual fund companies to publish active share disclosures, stressing that investors should have equal access to such information in order to make more informed investment decisions.
The survey found that on average, an active fund cost an investor 4.5 times more per year than a passive fund but the higher fees do not necessarily mean a higher level of active management, which is measured by the degree of overlap between the holdings in the fund and the holdings in the fund’s benchmark index.
The agency further stated that many mutual fund companies choose to disclose active share information to institutional and professional investors rather than retail investors.
'These new disclosures will give main street investors access to critical information before making investment decisions for themselves and their families,’ said attorney general Schneiderman. ‘By working with us to help level the playing field for all investors, these firms are taking an important step forward. I encourage all mutual fund firms to follow suit.’