ESMA has published a statement providing details of its work on closet index tracking funds. This refers to the practice of fund managers claiming to manage portfolios actively when in reality the fund stays close to a benchmark. ESMA is concerned the practice may harm investors as they are not receiving the service or risk/return profile they expect based on the fund’s disclosure documents while potentially paying higher fees compared to those typically charged for passive management. An investigation indicated that between 5% and 15% of UCITS equity funds could potentially be closet indexers. ESMA will work with national regulators to determine any further actions. (Source: ESMA Updates on Closet Index Tracking)