A topic widely discussed in the European fund industry is actively managed funds that seem simply to follow an index without adding value for investors, while the management company charges fees for active management—so-called closet trackers. For me it is clear that active funds should add value to investors, either by reducing the risk attached to the market or by generating outperformance compared to their index. In this regard, I agree with the current investigations into these funds by the authorities of some European countries, since retail investors—especially—need protection. But the point I don’t agree with is how the activity

Jake Moeller examines recent discussions in the closet trackers debate.  It’s a tough time to be an active fund manager. Arguably it has been since the height of the global financial crisis when their fallibility was revealed in that traumatic event. Since then scrutiny by investors, regulators and financial media has been unrelenting and it has had a material impact on how active fund managers run their business. Reforms on the disclosures of fees are well documented, examination of inducements has affected how fund managers and gatekeepers interact and, the increasing prevalence of passive instruments and “robo” distribution has exerted