SCM is offering its services as an expert witness, pro-bono, to any class action investors may wish to pursue in respect of this deception to recover their lost billions
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The British public may have been swindled out of c. £803m in 2014 alone through insidious closet tracking practices ignored by the UK regulator (FCA) and made fun of by the current Chief Executive of the Investment Association. This is in addition to the £3 Bn estimate by SCM of the cost to investors over the previous 5 years
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More than a 1/3 (36%) of UK active funds are expensive copies of index funds – with less than 60% of the holdings being different from the index
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Two household name funds, run by Halifax and Scottish Widows, managing a combined £7.9 Bn were found to be over 78% identical to an index clone, resulting in the true fee for the active part of the fund being over 7% pa, rather than their headline charge of 1.5% to 1.6% pa
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The SFO needs to step in and investigate as its own definition of fraud is ‘an act of deception intended for personal gain or to cause a loss to another party’. The combination of high fees and high index cloning, makes it almost impossible for these funds to achieve their claims
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SCM Direct is offering its services pro-bono to any class actions against any UK fund group in respect of closet indexing. Such class actions have already started within Europe, and SCM believes that only activist investor activity will end this widespread deception
The full research paper is available here with a full table showing the analysis of 154 retail UK equity funds, managing a combined £137bn.
Commenting on the new research, Gina Miller, founder of SCM Direct and the True and Fair Campaign said,
“Since our True and Fair Campaign launched three years ago, we have worked tirelessly to expose the numerous malpractices within the UK fund management industry. We have exposed and moved the dial on hidden charges, securities lending, commission payments, collusion, and conflicts of interest. We have also contributed to EU legislation that will result in total cost transparency for investors.
But the industry needs to be honest not only about their fees but what they are doing to justify those fees.”
“The UK industry is more than 10 years behind the US in giving consumers transparency of holdings, in full, via the internet. Similar transparency in the UK would quickly reveal the 36% of UK funds potentially defrauding the public by pretending to be truly active and offering something different to cheaper index products. As much as £800m could have been obtained by this deception in 2014 alone, and £3 Billion over the previous 5 years. We are offering to assist the British public in any class actions to reclaim these Billions.”
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