EFAMA launches new industry initiative to extend the European Fund Classification (EFC)
16 October 2018
The European Fund Categorization Forum (EFCF) – a Task Force of the EFAMA – has launched an Indicative Classification (IC) to address the market need for a stronger coverage of the European Fund Classification (EFC). The introduction of the IC sees a major boost to the number of funds classified, enabling more complete peer groups to create meaningful comparisons.
The EFC is a pan‐European classification system of investment funds, which has been developed by the EFCF to permit simple comparison of funds with comparable investment strategies. The growth of cross-border fund distribution heightened the need for such a classification system to facilitate consistent peer group analysis across Europe and strengthen the further development of the single market for investment funds.
The European Fund Classification combines many advantages:
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It is built on well-defined criteria to define EFC categories and ensure transparency for investors and fund management companies.
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It involves regular monitoring of holdings by a neutral classification administrator, FundConnect, to ensure that funds do not drift from their stated objectives.
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It is industry-owned and managed without being influenced by any singular commercial interests.
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Fund groups can have their funds classified for free and the classification results are provided to the market free-of-charge.
To further increase the number of funds classified according to the EFC, the EFCF has decided to provide IC for funds for which the classification administrator does not obtain the portfolio holdings. The IC will be carried out by providers interested in collecting relevant information and data from different sources with a view to determine, in close coordination with the EFCF, in which EFC category the funds belong, taking into account the thresholds set in the EFC categories.
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