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April 05, 2018 at 03:52 PM
(Photo: Thinkstock)
Active share, that portion of mutual fund assets that are truly actively managed, will no longer be a mystery for many investors. As a result of an investigation by New York Attorney General Eric Schneiderman, 13 mutual fund companies will disclose the active share percentage of more than 400 actively managed equity funds on a quarterly basis starting this spring.
The companies include Vanguard, BlackRock, American Funds, Nuveen, T. Rowe Price and The Capital Group. Fidelity already discloses active share information, as does JPMorgan for all but one of its actively managed funds. (For a full list of the fund companies, see Mutual Fund Fees and Active Share.)
“These firms are taking an important step forward,” said Schneiderman in a statement. “I encourage all mutual fund firms to follow suit.”
(Related: How to Use Active Share to Find High-Performing Mutual Funds)
“These new disclosures will give Main Street investors access to critical information before making investment decisions for themselves and their families,” said Schneiderman.
It will also make it easier for financial advisors to have that information and share it with clients, though Schneiderman notes that many professional and institutional investors are already privy to active share information while many retail investors are not.
(Related: Actively Managed Funds Disappoint in 2017 With Some Bright Spots)
“Whether investors choose to invest with a financial professional or not, they should have access to information they can use to educate themselves, compare funds and make informed investment decisions,” the report notes.
The AG’s report notes that individual investors who rely on the advice of brokers or financial advisors when choosing mutual funds would have been assured of receiving advice in their best interest for their retirement accounts if the Labor Department’s fiduciary rule had taken effect, but that is not the case currently. The White House has not decided against enforcing the rule, Congressional bills have been introduced to weaken or eliminate the DOL rule, and the SEC has yet to introduce its own fiduciary standard.
The report notes that fees in actively managed funds were almost 4.5 times more per year than fees in passive funds — an asset weighted average of 75 basis points versus 17 basis points in 2016 — but don’t necessarily reflect a high level of active management.
