This crazy EU rule means that our investment funds are running out of money, says Ros Altmann

Britain must abolish an EU law that has left investment funds in “existential danger” and “starved” of funds, a leading peer has warned.

Investment trusts are publicly traded companies that make their money by buying shares in other companies. Millions of Britons have savings in such trusts.

But rules introduced by the European Union before Brexit require trusts listed on the London Stock Exchange to report their fees and expenses in a way that makes them appear more expensive than they are.

Baroness Ros Altmann, Pensions Secretary under David Cameron and Theresa May, told The Mail on Sunday that the rules had been “misapplied” and were not even being followed by trusts still based in the EU.

“We have not reaped any of the benefits of leaving the EU, we have even imposed an additional penalty on ourselves,” Altmann said.

The situation has left UK investment funds at a “unique disadvantage” compared to international rivals, she added.

Under EU regulations adopted in 2013, these trusts, which are listed on the stock market, were classified as 'alternative investment funds'.

From a regulatory perspective, this puts them in the same category as private equity and hedge funds, which are often opaque about their fees.

But the trusts are already subject to the strict disclosure rules required of public companies.

Altmann said this 'confusing' arrangement meant trusts had to report certain costs in a way that made it appear as if they were paid directly by investors, when that was not the case. This made investing in it seem more expensive than reality.

Similar companies from abroad do not report these allegations in the same way, she said, and as a result it “incentivized investors not to support British companies.”

Altmann has introduced a bill in the House of Lords to remove investment trusts from these disclosure rules, which she says would help rebalance the playing field and attract money back to Britain.

Investec's Alan Brierley warned that London-listed trusts could see trading at discounts to the value of their underlying assets 'entrenched' if the problem is not resolved, adding: 'The risk is that many investors have lost their exposure reduced because of the cost disclosure rules we may not see the same recovery.”

The government is trying to stem the sharp decline in money being pumped into Britain by some of Britain's biggest institutions. Official figures recently showed that the number of London-listed shares held by pension funds will fall to a record low of just 1.6 percent in 2022.

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