Asset managers are letting investors down by failing to disclose everything that’s in a portfolio

Each year UK investors pour billions of pounds into funds, yet few people actually know where their money is going.

The investment industry is notoriously coy about sharing information about where its funds invest their money. We believe Woodford Investment Management is the only major investment house to publish its full list of portfolio holdings online every month for anyone to see.

Craig Newman, chief executive at Woodford Investment Management, says: ‘We strongly believe that all of our investors have the right to know where their money is invested, from the biggest holding in the fund to the smallest.’

When this policy was first implemented there was speculation about whether the industry would follow suit. So far, those who had hoped for this event to happen have been sorely disappointed.

funds

WHY DO ASSET MANAGERS HIDE THEIR PORTFOLIO?

Some investment houses attribute their secrecy to protecting their unitholders’ interests or say that a list of full holdings is commercially sensitive information.

Some commentators point out that mangers may not want to open themselves up to the level of scrutiny which fund manager Neil Woodford has endured in recent months – listing every holding means the manager is lambasted every time one takes a hit.

But is it fair to ask investors to part with their money without telling them where exactly it is going?

Gina Miller founded the True and Fair Campaign six years ago, urging funds to be transparent about fees and to publish their full holdings at least quarterly. She points out that US investors have been provided with this information since 2004.

She says: ‘It is scandalous that neither the UK investment industry or regulator have granted UK investors the same basic right granted to US investors of knowing what they are really buying.

‘If we had 100 per cent transparency, dubious practices such as closet indexing and mis-labelling of funds might not have happened, or certainly would have been spotted earlier,’ she adds.

ARE THERE ANY RULES REGARDING DISCLOSURE?

Industry trade body the Investment Association says it ‘supports transparency’ and that funds must disclose their full portfolio twice a year as a minimum – but there are no strict rules on how this information is made available.

The only stipulation is that the material is supplied free of charge on request; there is no criteria for holdings to be published online.

Janus Henderson, for example, says it releases portfolio holdings on a monthly basis but these are not available online. Instead, investors need to contact the firm’s call centre to get the information.

BlackRock, too, says full holdings may be made available to unitholders ‘on request’. A spokesman says: ‘We do not consider it appropriate to proactively publish full holdings for our active funds outside of the reports and accounts.’

The investment house does disclose full holdings online for its exchange traded funds but says ‘an active portfolio manager must be afforded the environment to manage their portfolio with appropriate safeguards and confidentiality’.

Many investors may think it unreasonable to hand over their hard-earned money to fund managers without knowing exactly where it is going.

DANGERS TO INVESTORS

Transparency is only part of the issue; investors are constantly told to ensure their portfolio is diversified but, without knowing all of a fund’s holdings, it is impossible for individuals to ensure there is not overlap between their funds which could see them overexposed to
a stock or sector.

Investment trusts are required to disclose a ‘comprehensive and meaningful analysis of their portfolio’.

The AIC says any holding accounting for 5% or more of the portfolio value should be disclosed along with ‘at least the top 10 largest holdings and further details of any unquoted investments’.

Annabel Brodie-Smith, communications director at the AIC, says: ‘Many investment companies disclose their whole portfolio or a substantial part of it but there may be circumstances where disclosing all holdings may not be in the best interest of shareholders, such as the disclosure of small or illiquid companies which may threaten a trust’s ability to trade the holding.’

Columbia Threadneedle publishes its full fund holdings quarterly in its reports and accounts, which can be found online.

Baillie Gifford also publishes holdings for all of its funds and trusts online, though there is a two-month time lag on the information.

James Budden, marketing director at Baillie Gifford, adds: ‘We have a low portfolio turnover so we believe this works well and provides helpful transparency. Presumably those that don’t, wish to keep their ideas to themselves rather than share them with their investors and the competition.’

FUND MANAGERS COULD BENEFIT FROM TRANSPARENCY

Mark Polson, principal at consultancy firm The Lang Cat, says: ‘It’s hard enough for professionals in the industry to get to the heart of what is in a fund, let alone a normal investor.

‘Fund managers seem to believe that if they publish full details of their holdings then the magic will go and they’ll be plagued with copycats, but actually publishing this information routinely would be
a great way for managers to show they have nothing up their sleeves.’

Asset managers Jupiter, Schroders and M&G did not respond to our request for comment. (HB)

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