This is a personal blog by ShareSoc Director Cliff Weight and does not necessarily represent the views of ShareSoc.
I have been concerned about Closet Indexing for some time. As have many others, eg
I met with executives from the FCA on 26 July to discuss our concerns. I have also had several conversations with David Rankin from Punter Southall. The latest news is that Harcus Parker have now starting gathering claimants for a class action against Scottish Widows. They have said-
Harcus Parker has been investigating claims against fund managers and others for closet tracking: the practice of describing a fund as actively managed and charging for that service but in fact merely tracking an index or constraining performance, with the effect of tracking an index.
The FCA has been investigating closet tracking for several years, and fined Henderson Investment Funds Limited £1.9m in 2019 for failing to treat fairly 4,500 retail investors in two funds which charged active fees. There has also been activity abroad, with litigation having successfully been pursued in Norway and two ongoing class actions in Canada.
We are currently focussing our investigations on Scottish Widows and in particular the Scottish Widows UK Growth Fund. If you have invested in this fund, we would really like to hear from you in order for us to further our investigations. This fund has been the subject of several articles discussing closet tracking in the UK and recently featured as a ‘Dog Fund’ (an underperforming investment fund) in Bestinvest’s Spot the Dog Fund Report for 2021. Bestinvest provide the following statement about Scottish Widows generally:
“For Lloyds Bank owned Scottish Widows, it is not necessarily the size of assets in dog funds – £2.73 billion – but the range. It has four dogs, across a surprising variety of sectors – Scottish Widows Pacific Growth, Scottish Widows American Growth, Scottish Widows UK Growth and Scottish Widows UK Equity Income. Again, it is disappointing to see large UK funds underperforming after a better period for UK markets. Take note that the investment adviser on these funds is Schroders.”
Please contact us by email at firstname.lastname@example.org or by telephone on 020 3995 3878 if you are an investor in the Scottish Widows UK Growth Fund and would be interested in hearing more about how you can help us.