EFAMA updates the European Fund Classification Categories

The European Fund Classification (EFC) is a pan-European classification system of investment funds which has been developed by the European Fund Categorisation Forum (EFCF) – a dedicated Task Force of the European Fund and Asset Management Association (EFAMA). The EFC has created a single transparent pan-European methodology for comparing funds. Thanks to this categorisation investors know what they can expect when they invest in an EFC compliant fund.

The categorisation is performed on a share class level. A pan-European classification structure has never been more important. UCITS are recognized worldwide as highly regulated and transparent investment products, ideally suited for retail investors. Every effort that can be made to reinforce this core benefit will further strengthen the industry in its positioning within the savings arena.

The EFC system is different for the following reasons:

The EFCF was formed by a group of fund management companies and data vendors for the specific purpose of defining the parameters for a pan-European classification system of investment funds.

Overview of the European Fund Classification

The general rule applying to the classification structure is that one fund/share class can only be classified in one category according to the assets in which the fund invests. According to this rule, the investment fund universe is split into six main categories: equity, bond, multi-asset, money market, “Absolute Return Innovative Strategies” (ARIS) and other funds.

Equity Fund Categories

Equity Fund Categories Funds with more than 85% exposure to equity are classified as equity funds. Equity funds can be differentiated according to three main classification criteria: sector, geographical exposure and market capitalization. Investment theme is added as a fourth classification criterion, in parallel with the three main criteria. The graph below illustrates how the categories for the equity universe have been defined.