Marketing Managed Funds – ASIC Surveillance

ASIC’s recent surveillance of responsible entities and trustees of investment funds has resulted in 13 fund managers taking action to amend their marketing materials. ASIC’s surveillance focussed on the impact of marketing on retail and unsophisticated wholesale clients, with the primary concerns relating to misleading or ambiguous performance or risk representations.

ASIC’s Surveillance and Key Findings

It is important to note that ASIC’s surveillance included unregistered funds targeting wholesale investors and the issues that were identified by ASIC as problematic apply to the promotion of these funds in the same way as to funds targeted at retail investors.

ASIC’s surveillance identified a number of concerns, which all fund managers should take note of, including:

  • Inadequate warnings or disclaimers about past or future performance;
  • Comparisons that were not appropriate, including comparing the product to lower-risk products, indices or benchmarks;
  • Downplaying the risks of the product.

The surveillance examined the risk and performance representations made in managed fund marketing – including both traditional and digital media marketing. ASIC’s Deputy Chair, Karen Chester states

“ASIC remains concerned that managed fund promoters continue to target consumers, particularly retirees or those planning for retirement, with ambiguous or misleading performance and risk representations. Where we identify fund marketing of concern, we will also review the corresponding product disclosure statements, websites and target market determinations to assess if the marketing claims are misleading.”[1]

Action to Take

Fund managers responsible for the promotion of registered and unregistered funds should ensure:

Warnings and disclaimers are adequate

This means the warning must:

· be sufficiently clear, prominent or close to the claim to which the warning relates;

· be included in all media, not just traditional media;

· include relevant risk information and provide assumptions underlying target returns (where applicable).

· where the disclaimer relates to past performance, ensure that it is accurate;

Claims about performance and target returns are reliable

This means they must be benchmarked appropriately, based on the fund’s assets and strategy. It is important that marketing material does not overstate the safety, reliability or security of an investment.

Comparisons are appropriate

This means that:

· fund managers must compare their product with another product that has similar features and risks;

· comparisons should be consistent with the fund’s assets and strategy and be reasonable.

Sources for claims of performance are referenced

One piece of promotional material in ASIC’s surveillance included the claim that the fund was “best performing” with no source or date for the claim. Claims like this should always include an appropriate source and date to ensure they are not misleading or deceptive.

Further Reading

[1] ASIC Scrutinises Marketing of Managed Fund Performance and Risks

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