Transparency campaigners have rebuked the UK’s Investment Association after it published research seeking to tackle what it regards as “hysteria” over hidden asset management fees.

In a lengthy and detailed statement released the day after the asset management industry body likened hidden fees with the mythical Loch Ness monster, the founding chairman of the Transparency Task Force, Andy Agathangelou, said the opacity of fees in the industry was a “festering sore on the face of financial services”.

Agathangelou said he would usually welcome any piece of research conducted on the topic of hidden fees but was “concerned” the IA was undermining its own work through its “churlish” reference to the Loch Ness monster.

“Hidden costs prevent the market working efficiently because knowledge of true cost is a pre-requisite for the ‘invisible hand’ of market forces being able to work its magic,” he said.

“In market-efficiency terms, the pensions/investment sector is fundamentally flawed at best.”

He went on to question whether the IA were accusing legislators and regulators of being “fools” for believing there is a problem over transparency within the industry.

“Or maybe the IA even think they themselves are fools, having recently set up an advisory board (of which I’m a member) to help deal with the need to disclose costs better, including hidden costs,” he said.

The advisory board, to be chaired by National Employment Savings Trust CIO Mark Fawcett, is set to launch a consultation on fee disclosure in the coming weeks, ahead of a new framework for disclosure being agreed.

The True and Fair Campaign, which has campaigned on fee disclosure for a number of years, also took issue with the research conducted by Fitz Partners, which claimed the sample of equity funds examined incurred transaction costs of 17 basis points, with a turnover rate of 40% over the three years examined.

The campaign group took issue with the methodology applied by Fitz, saying transaction costs should include the spreads of securities, and the bid/offer spread, but that these had been ignored in favour of transaction costs disclosed within each fund’s accounts.

“These spreads are hidden from their accounts and excluded from the analysis,” it said.

It argued that the exclusion of such spread-related costs omitted a significant transaction cost from fees disclosed to asset owners.

The arguments come amid a push for the UK to adopt a disclosure code based on the mandatory framework agreed for Dutch pension funds