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Now that European funds have been labeled as “Closet Indexers,” will it be long be before U.S. fund managers are similarly investigated?

European fund management houses have been named and shamed in a report by an influential investor advocacy group which has sought to expose managers who demand high fees but closely track their funds' underlying benchmarks.

Of the 1,013 funds examined, 165 performed as "potential closet index funds" from 2009 – 2014, according to the research by Better Finance, details of which were first published in the Financial Times on Sunday.

Similar conclusions were reached last March by the European Securities and Markets Authority (ESMA), the regional watchdog. However, the regulator, which found that up to 15% of equity funds across the continent could be potential closet indexers, refused to name the funds concerned, prompting Better Finance to attempt to replicate the inquiry. The advocacy group used identical parameters to ESMA to determine the "potential" closet trackers, namely, whether funds had less than:

• 60% active share – i.e., evaluates how differently a portfolio's holdings differ from the benchmark's; and,
• 4% tracking error – i.e., looks at the difference in returns.

Among the names included are the following behemoths with many billions of investor dollars under management: Amundi, Fidelity International, Henderson, JPMorgan Asset Management (JPMAM) and Schroders.