American Century has claimed allegations over closet indexing in one of its value funds are ‘false’, after an investor brought legal documents against the US group claiming the actively managed fund too closely resembles the index.
As reported in the Financial Times on 10 November, Vera Hays, who has held the American Century Value fund since 2015, said the ‘closet indexing’ she has witnessed does not justify the fund’s associated management fees.
Fund documents filed on 5 November state its managers select undervalued companies and hold those stocks until their values reach or exceeds the level that reflects American Century’s fair value. However, Hays said this was not the case.
A spokesperson for American Century told Citywire Selector acknowledged the legal case being proposed against the $2.4bn fund. However, the firm has denied the plaintiff’s claims.
‘American Century maintains that the allegations are false and completely without merit, and the company will vigorously defend the lawsuit. The active management of the fund is confirmed by its holdings and a variety of widely used metrics used to analyse the fund in comparison to its benchmark.’
The American Century Value fund returned 29.8% in US dollar terms over the three years to the end of September 2021, against a 30.3% US Value sector average.
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