Why the regulatory witch-hunt for �closet trackers� is a dead-end

ESMA, the European watchdog of securities markets, has announced its intention to take a closer look at so-called �closet trackers�, with a view to identify whether there is a potential need for a coordinated pan-European policy response to these particular funds, which are supposedly actively managed but in reality closely track their benchmarks. In this commentary, Jean-Pierre Casey suggests that more work needs to be done to demonstrate that a market failure exists. He also cautions on some of the difficulties associated with a potential regulatory intervention. In his view, the perceived problem is best tackled through transparency and competition.