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NAPF and FMA initiate trading costs code

UK – The UK National Association of Pension Funds (NAPF) and the Fund Managers’ Association (FMA) are to set up a disclosure code on trading costs for fund managers.

The joint project will build on the ten sample questions devised by Paul Myners for pension fund trustees to ask their fund managers in relation to commissions and other costs.

Research carried out by Professors Brealey and Neuberger from the London Business School on behalf of the FMA, suggests that it is not possible to prescribe one particular mechanism for commission charges and that there is little evidence that one fee structure covers all.
They believe that it is more important for plan sponsors to be aware of what is paid to brokers and why.

The new code will be developed by a working group comprising representatives of both the NAPF and FMA, which hope it will become part of the regular review process of all pension funds.
The working group hopes to complete the project early next year.

Says Alan Rubenstein, chairman of the NAPF’s investment council: “At a time when many in the pensions industry still have concerns about parts of the Myners report, this innovative project will provide a practical framework to help trustees and their fund managers review their trading costs.”

Lindsay Tomlinson, chairman of the FMA, adds: “We hope that this initiative will achieve an industry wide standard whilst not prescribing an onerous disclosure regime.”

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