DNB makes changes to censured active fund

RiskDNB Asset Management, the firm censured by the Norwegian regulator for providing a return too close to the benchmark for one of its active funds, says it has increased risk in the fund and made changes to the asset management team.

In a statement, the firm also indicates the fund was caught out by central bank stimulus policy.

Fianstilsynet, the regulator, analysed the Verdipapirfondet DNB Norge fund over five years and found its performance was very close to its benchmark – yet the fund is marketed and priced as an actively managed fund, which the regulator said was “censurable and counter to good business practice”.

The regulator issued a corrective order to the firm, one of the largest asset managers in the Nordic region with €61 billion of assets under management.

In an e-mailed statement, DNB Asset Management says it has studied the criticism of the fund and that “according to the regulator”, the risk approach has been too cautious to ensure a satisfactory excess return after fees.

“DNB Norge has been and is an actively managed fund, and customers have received a very good rate of return on their investments in the fund. Over the last five years, the return has been 44.3% (2009-2014),” the statement says, though does not give details about the benchmark.

“Nevertheless, we see that the risk in the fund over the last few years has been lower than normal because equities have shown a more parallel trend than has previously been the case. In our opinion, this is due to a strong liquidity supply from the central banks to kickstart the different economies. We assumed that this would be a short-term trend, but now see that it will prevail.”

The statement continues: “We have therefore already taken action to increase the risk assumed by the fund. Adjustments have also been made to the asset management team. We have informed Finanstilsynet of this.”

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