No basis for compensation to mutual fund customers
In the opinon of DNB, the DNB Norge funds have been actively managed and generated significant values for the fund holders. Over the past ten years, two of three customers have received higher returns than if they had invested in an index fund, according to a new calculation.
In January 2016, the Norwegian Consumer Council announced that it would bring a civil action against DNB related to the management of the DNB Norge funds. DNB received the writ of summons in June. The Consumer Council claims that the management of the funds was not active enough. DNB has now reviewed the matter in detail and will present its repliy to the Oslo District Court this week.
Managed in line with the marketing material
“We have great respect for the efforts made by the Consumer Council on behalf of Norwegian consumers. In this case, however, we disagree that the unit holders have any claim. The funds are managed in line with the investor information and the promises made by DNB. The Consumer Council would like the courts of law to introduce a minimum relative risk requirement that only applies in Norway. This is an issue which should be considered by the legislator. In any case, it cannot be given retrospective effect,” says Even Westerveld, executive vice president in Corporate Communications in DNB.
DNB’s review shows that the large majority of customers achieved positive returns. For example if a customer had invested NOK 100 000 in DNB Norge in 2005, his/her investment would have grown to NOK 270 764 in 2015. If a customer had invested NOK 100 000 in 2010, he/she would have been left with NOK 144 270 five years later.
A comparison with a hypothetical index fund for the entire period from 2005 to 2015 shows that more than two-thirds (71 per cent) of customers encompassed by the civil action achieved higher returns after the differences in costs had been taken into account.
“The historical performance of the DNB Norge funds shows that the Consumer Council is mistaken when it claims that the funds are managed like an index fund. The DNB Norge funds have given significant excess returns during certain periods, whereas in other periods, performance has been markedly weaker than the index. Both are a consequence of the fund managers’ active assessments and choices,” says Westerveld.
Active choices made by active fund managers
The Consumer Council initiatlly notified a claim for compensation on behalf of current and former unit holders in DNB Norge in the period 2005-2015. After DNB had documented that the fund in this period delivered an excess return of 4.3 per cent compared with the index, the Council changed the claim so that it only applies to the five last years. In this period, the funds generated a lower return than the index.
“We are naturally not satisfied with the return generated over the last few years, but this does not mean that the fund managers have not made active choices. On the contrary, the team of fund managers has each year held more than 60 one-on-one meetings with companies on Oslo Børs and read 200-300 company analyses. In addition, they have had daily contact with analysts and brokers, and have participated in company presentations, capital market day events and general meetings. They do all this to have the best possible basis for making active investment choices in their customers’ best interests,” says Westerveld.
The DNB Norge funds were marketed as funds which should give their customers the possibility to share in the value development of the largest companies on Oslo Børs. Many of these equities are also strongly represented in the funds’ reference index. DNB is of the opinion that this matter is not suitable for a group action on behalf of 180 000 customers, as is the intention of the Norwegian Consumer Council, as there are major individual differences between the unit holders. Many of the customers have also received a return that the Consumer Council claims was impossible. In addition, there are very few customers who have submitted complaints. Nevertheless, in order to give the Consumer Council the possibility to judicially review the matter, DNB has suggested to carry out a so-called pilot civil action.
Contact person:
Even Westerveld, EVP Corporate Communications, tel. (+47) 400 16 744