UK Competition and Markets Authority Publishes Second Working Paper on its Investment Consultancy Investigation

The U.K. Competition and Markets Authority has published the second in a series of working papers on specific aspects of its market investigation into the supply and acquisition of investment consultancy services and fiduciary management services. The working paper should be read alongside the Issues Statement on the investigation, which was published in September 2017. The intention to publish a series of working papers on aspects of the investigation was outlined in a progress report in February 2018. The first working paper, relating to information on fees and quality, was published on March 1, 2018.

This working paper sets out the CMA's findings from a quantitative analysis undertaken to test whether asset management products recommended by investment consultants outperform their respective benchmarks. Manager recommendations are one of a number of services offered by investment consultants that the CMA is examining. The CMA recognizes that manager recommendations are only one part of the services offered by investment consultants, but this service is one which potentially adds value, can reasonably be measured and in respect of which client-facing performance claims are often made.

The working paper outlines quantitative analysis undertaken by the Financial Conduct Authority to look into whether investment consultants are able to add value through their manager ratings services and then sets out details of the work conducted by the CMA to test and expand on the FCA's work.

Some respondents claimed that recommended products tend, on average, to outperform their respective benchmarks, but the CMA's analysis has found no evidence that, net of asset management fees, "buy-rated" products outperform their respective benchmarks or other, non-recommended, products to a statistically significant extent.

The CMA invites comments on the analysis set out in the working paper by April 5, 2018. The working paper will then be finalized and will form part of the CMA's provisional decision report on the investigation, which is scheduled to be published in July 2018.

View the working paper.

View details of the Issues Statement.

View details of the working paper on information on fees and quality.

View the CMA case page.