Invest
‘True to label’ warning again given to fund managers: ASIC
Consumers should be wary: Fund managers aren’t doing enough to ensure products are “true to label”, with a number of product names not aligning with underlying assets in those funds.
‘True to label’ warning again given to fund managers: ASIC
Consumers should be wary: Fund managers aren’t doing enough to ensure products are “true to label”, with a number of product names not aligning with underlying assets in those funds.
A statement from the Australian Securities and Investments Commission (ASIC) said recent surveillance had found fund managers “must do more” in ensuring product naming and labelling practices are accurate for consumers.
This is especially pertinent given that during times of market volatility, consumers may be looking for alternate investment options offering regular or higher returns, “and financial product labels are used as a guide for consumers about what they are investing in”, ASIC conceded.
Having examined the appropriateness of product labels used by 37 managed funds, ASIC deputy chair Karen Chester said two significant concerns were raised across a number of products: “First, confusing and inappropriate product labels across 14 ‘cash’ funds with under $7 billion in assets. And second, redemption features not matching the liquidity of underlying assets, with a significant mismatch in three funds with under $1 billion in assets.”
According to ASIC, out of the 22 managed funds that used the term “cash” in their labelling, 14 funds had “confusing or inappropriate labels”.
It reported that some funds that were labelled as cash funds had asset holdings more akin to a bond or diversified fund, which have significantly higher risk and less liquidity compared with a traditional cash fund.
It flagged this as especially prominent in funds using words such as “cash enhanced” and “cash plus” in their labelling.
While the funds reviewed did generally display satisfactory of redemption features with liquidity, “significant mismatch” was seen in a small number of funds.
Ms Chester flagged that managed investment products “are not prudentially regulated or government-guaranteed, so it is paramount that consumers are not misled about the level of risk associated with a particular product”.
She said responsible entities must therefore ensure their products are “true to label”, stating that “this is not a nice-to-have”.
“It’s a must-have for responsible entities in meeting their legal obligations to their investors, especially in terms of market volatility.”
Explaining further, the deputy chair said inappropriate labelling of a fund can mislead investors into believing that the fund is much safer or more liquid than it actually is.
“Put simply, a fund should not use terms such as ‘cash’ or ‘cash enhanced’ unless its assets are predominantly in cash and cash equivalents.”
It comes after a warning to fund managers earlier this year that saw ASIC advise that consumers must only be given “clear, balanced and accurate information”.
At the time, the corporate regulator revealed it had put a number of managed investment schemes on notice.
About the author
About the author
Mutual funds
Micro-investing: Is it worth it?
Investing can be complex. It involves making financial decisions on how your money is going to be invested and managed over time, as well as figuring out the right strategy for each investment. There ...Read more
Mutual funds
RAIZ v Spaceship: Which is better value?
Raiz and Spaceship have become the two biggest apps in the micro-investing space, but which offers a better deal for Aussie investors looking for a hands-off savings strategy? Read more
Mutual funds
Sold your stocks during the dip last year? Here’s how much it might have cost you
If you cashed out during last year’s COVID-19 crash, here’s how much it might have cost you. Read more
Mutual funds
Move over, mainstream: ESG excels
Responsible investing is proving its worth in the investment game, beating out the total return of the S&P/ASX 300 over the last decade. Read more
Mutual funds
ASIC makes frozen funds easier to access
A new relief measure will enable investors suffering hardship to access their investment money even where managed funds have been “frozen” to maintain fund stability through the COVID-19 pandemicRead more
Mutual funds
Is it time to put a food-style label on investment products?
Much like the food people eat, investors are being told they need to know what they are buying before purchasing exchange-traded products, as many are unaware of the ramifications if they don’t. Read more
Mutual funds
Why you should think about ESG investing this World Environment Day
Today marks World Environment Day, with experts using the occasion to flag how Aussies can benefit by investing in a way that helps the planet. Read more
Mutual funds
Is a model portfolio the way to go during a downturn?
The use of model portfolios – a type of managed account – can provide investors with a range of benefits during a downturn such as the COVID-19 crisis, an investment expert has touted. Read more
Mutual funds
Micro-investing: Is it worth it?
Investing can be complex. It involves making financial decisions on how your money is going to be invested and managed over time, as well as figuring out the right strategy for each investment. There ...Read more
Mutual funds
RAIZ v Spaceship: Which is better value?
Raiz and Spaceship have become the two biggest apps in the micro-investing space, but which offers a better deal for Aussie investors looking for a hands-off savings strategy? Read more
Mutual funds
Sold your stocks during the dip last year? Here’s how much it might have cost you
If you cashed out during last year’s COVID-19 crash, here’s how much it might have cost you. Read more
Mutual funds
Move over, mainstream: ESG excels
Responsible investing is proving its worth in the investment game, beating out the total return of the S&P/ASX 300 over the last decade. Read more
Mutual funds
ASIC makes frozen funds easier to access
A new relief measure will enable investors suffering hardship to access their investment money even where managed funds have been “frozen” to maintain fund stability through the COVID-19 pandemicRead more
Mutual funds
Is it time to put a food-style label on investment products?
Much like the food people eat, investors are being told they need to know what they are buying before purchasing exchange-traded products, as many are unaware of the ramifications if they don’t. Read more
Mutual funds
Why you should think about ESG investing this World Environment Day
Today marks World Environment Day, with experts using the occasion to flag how Aussies can benefit by investing in a way that helps the planet. Read more
Mutual funds
Is a model portfolio the way to go during a downturn?
The use of model portfolios – a type of managed account – can provide investors with a range of benefits during a downturn such as the COVID-19 crisis, an investment expert has touted. Read more