The European Fund and Asset Management Association (Efama) is set to expand the number of funds covered by its European Fund Classification (EFC) system, in efforts to create more complete peer groups and aid meaningful comparisons between products.
Efama’s EFC is a pan‐European classification system of investment funds, which allows for comparison of funds with comparable investment strategies, and ensures transparency for investors and fund management companies.
It also involves the regular monitoring of holdings by a neutral classification administrator, while fund groups can have their funds classified for free and the results are provided to the market free of charge.
Moreover, Efama said the growth of cross-border fund distribution has heightened the need for such a classification system to “facilitate consistent peer group analysis across Europe and strengthen the further development of the single market for investment funds”.
As a result, the industry body has now launched an ‘indicative classification’ (IC) for funds where the classification administrator does not obtain the portfolio holdings.
The IC will be carried out by providers interested in collecting relevant information and data from different sources, with a view to determining in which EFC category the funds should belong.
An IC has already been made for funds distributed in the Nordic countries, which has been carried out by the classification administrator, as well as Switzerland and Germany, provided by FE.
Commenting on the launch of the IC, Peter De Proft, director general of Efama, said: “The launch of an indicative classification is an important step to increase the visibility of the European Fund Classification and the coverage of the fund market, and to convince a greater number of fund managers to have their funds classified on the basis of their portfolio holdings.”
This article first appeared in Investment Week.