Regulation: Luxembourg’s consumer investment funds match European averages for risk, a new study by research firm Lipper has found.
As part of the “UCITS IV” rules that regulate pan-EU mutual funds and went into effect last summer, investment firms now need to provide “Synthetic Risk and Reward Indicators” on their standardised documentation for retail investors. The SRRI is meant to indicate the overall risk/reward profile of a fund. A score of one represents the lowest level of volatility, and seven indicates the highest.
Lipper looked at the self-disclosed SRRI scores from across Europe and found a heavy concentration at the riskier end of the scale for equity funds in most countries, reported Ed Moisson (photo), the firm’s head of UK and cross-border research. EU-wide, 94.5% of equity funds fall into SRRI bands six or seven.
In Luxembourg, 95% of global equity funds sat in bands six and seven. That compares to 94% of Irish funds, 97% of French funds and 88% of UK-domiciled funds, according to figures Lipper provided to Delano.
Bond funds tended to cluster in the middle of the risk scale. Across Europe, 74.4% sat in bands three or four. For Luxembourg bond funds, the figure was again right on the average.
Moisson stressed that the research--published Wednesday--was focused more on asset classes and not specifically meant as a tool to compare domiciles. However, retail investors may want to check a particular fund against others in its class.
The Lipper study examined 21,400 funds and sub-funds in Europe, including 5,748 Luxembourg-domiciled funds and 2,059 UK-domiciled funds.