UK - NAPF CONFERENCE - The FSA has found "some" evidence of market timing among UK fund management firms, keynote speaker John Tiner (pictured) told delegates.
Speaking at the NAPF’s investment conference, the FSA chief executive said that after an extensive review of 31 firms, the regulator found that there was some evidence of market timing in UK authorised collective investment schemes.
“But there is no evidence that market timing is widespread or that it has been a major source of detriment to long term investors,” he said.
The FSA is expected to come out with a detailed statement on Thursday.
Last year, the FSA undertook a review to determine whether the types of abuses uncovered in mutual funds in the US were a significant problem in FSA authorised schemes.
Market timing is a practice involving speculators who trade outdated prices, in other words they exploit time lags between official fund NAVs (net asset value) and their true value over a timezone.
Tiner said that at the root of these issues was how fund managers dealt with conflict of interest.
“Open-ended funds are a feature of our industry but in running them fund managers need to be aware of the potential for market timers to make profits at the expense of long term investors. Fund managers need to monitor the activity in their funds so that they can manage the effect on their funds,” he added.
Tiner also warned that fund managers need to balance carefully the financial rewards resulting from increasing funds under management against potential dilution if trading occurs on a significant scale.
“Market timers don’t need to be using any non-public information to do this (market-timing) and they are not breaching any of our rules by ‘timing’. However, we believe this activity is capable of causing real detriment – which is why we feel strongly that fund managers must ensure it doesn’t happen.”
Tiner said that the FSA had found no evidence of late trading among UK schemes.
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