FCA review finds fund groups failing on leverage disclosure

Investors are not receiving adequate information on the extent to which funds are being levered up through the use of derivatives, a review by the Financial Conduct Authority (FCA) has found.

The FCA's fund supervision team, the creation of which was revealed at Investment Week's Fund Management Summit last September, has published findings from a review into leverage disclosure, as well as a separate look at property funds' liquidity management. Its study of leverage reporting encompassed a sample of 19 funds that use derivatives for investment exposure, and identified a number of  failings. "Only 11 out of 19 funds described the risk of leverage in their prospectus, while only five disclosed the expected leverage level. The actual level of leverage was disclosed in the a...