The European Fund Classification Forum (EFCF), a task force of European Fund and Asset Management Association (EFAMA), have launched a new industry initiative to extend the European Fund Classification (EFC).
The launch of the indicative classification (IC) is set to address the market need for a stronger coverage of the EFC.
Meanwhile, the introduction of IC sees a major boost to the number of funds classified, which will enable complete peer groups to create meaningful comparisons.
The EFC is a pan-Europe classification system of investment funds, which has been developed by the EFCF to permit simple comparison of funds with comparable investment strategies.
According to EFAMA, the EFC is built on well-defined criteria to define EFC categories and to ensure transparency for investors and fund management companies.
Another advantage is its involvement in regular monitoring of holdings by a neutral classification administrator, FundConnect, to ensure that funds do not drift from their stated objectives.
Additionally, fund groups can have the their funds classified for free and the classification results are provided to the market free-of-charge, EFAMA revealed.
To further increase the number of funds classified according to the EFC, the EFCF has decided to provide IC for which the classification administrator does not obtain portfolio holdings.
Providers who are interested in collecting relevant information will carry out the IC and data from different sources to determine in which EFC category the funds belong to while taking the thresholds set in the EFC categories into account.
Peter De Proft, director general of EFAMA, noted: “The launch of an indicative classification is an important step to increase the visibility of the EFC and the coverage of the fund market, and to convince a greater number of fund managers to have their funds classified on the basis of their portfolio holdings.”
