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EFAMA Publishes Briefing on the European Fund Classification (EFC)

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The European Fund and Asset Management Association (EFAMA) has published the second edition of its “European Fund Classification” (EFC) Forum Briefing which updates on progress made towards the adoption and enhancement of the EFC so far this year.

The EFC has been launched with a view to enhancing the integrity of European investment funds. The primary goal of the EFC is to make available to all industry stakeholders a classification structure which will address transparency issues. In the short-term it aims to classify and regularly monitor every investment fund available for sale in multiple jurisdictions and the long-term plan is to have complete coverage of UCITS.

The EFC Forum reports that it has now finalised the ‘high level’ categories under which the detailed sector classifications will be grouped. Under this methodology, the universe of equity, bond, mixed and money market funds is segmented according to eight criteria: country/region, sector, market capitalization, currency, credit quality, interest rate, emerging market exposure and asset allocation. EFAMA will publish a report presenting and defining all high level categories in 2012 Q1.

The EFC has made significant progress having classified 5,822 funds incorporating 14,559 shares on the basis of the portfolio holdings at end June 2011. This is a considerable increase compared to the 2,847 funds and 10,155 shares classes classified at end March 2011. Furthermore, 30 EFAMA corporate members are now submitting their cross-border funds to the EFC classification process; the list is provided in the Briefing.

Looking forward, a number of fund distributing platforms will incorporate the EFC within their selection system – Allfunds Bank is already committed to that – and a number of fund managers will start providing portfolio data for the classification of their home domiciled funds. These developments will further enhance the profile of the EFC in 2012.

Peter de Proft, Director General of EFAMA commented: “The financial crisis highlighted the need for the fund industry to inform, protect and listen to investors and the EFC initiative to improve transparency is a message to European authorities, investor associations and the public that the industry is taking action to advance the protection of investors.”

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