Industry Updates

Vanguard ‘satisfied’ LifeStrategy fund does not breach FCA’s concentration limits

The range owns over 50% of its own index fund

Theo Andrew

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Vanguard has said it is “satisfied” its £34bn LifeStrategy fund range does not breach the Financial Conduct Authority’s (FCAs) concentration limits.

The passive giant’s flagship range, which comprises five funds invested in other funds managed by Vanguard, owns in aggregate over 50% of the £10.1bn Vanguard FTSE UK All Share Index fund, according to the group’s latest portfolio data.

Under FCA rules, funds are allowed to own up to 25% of a fund registered as a collective investment scheme. As the LifeStrategy range is structured as an umbrella, the rule applies to the collective assets of the funds.

A Vanguard spokesperson said: “Through our engagement with the FCA, we are satisfied that our LifeStrategy funds meet applicable diversification/concentration requirements. We have sought clarity on the matter with the FCA and legal representatives several times.”

It added that during the engagements there was some acknowledgement the rules have been a “source of confusion” within the industry given their similarity to Europe’s UCITS Directive.

Industry figures said the regulator’s silence on the potential breach has helped fuel confusion on the rule and raised concerns about how it is enforcing its directives, Bloomberg reported.

The FCA declined to comment on the matter.

Despite the potential breach, Vanguard is not listed on the FCA’s waivers and modifications by consent list, which gives firm permission to not comply with the rules.

A person familiar with the matter told Bloomberg the FCA is considering how to address the rule as it establishes its future asset management regime.

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