UK formally launches cost disclosure templates

A collaboration of investor organisations has finalised a series of cost disclosure templates for UK institutional investors.

The Cost Transparency Initiative was launched today by the UK trade bodies for asset managers (Investment Association) and pension funds (PLSA), along with the Local Government Pension Scheme (LGPS) Advisory Board.

It follows more than a year of work by industry representatives in the Institutional Disclosure Working Group (IDWG), set up by the UK financial regulator as part of its work to improve competition in and investor outcomes from the asset management industry.

Mel Duffield, pensions strategy executive at the Universities Superannuation Scheme, has been appointed the first chair of the Cost Transparency Initiative.

She said: “It hasn’t always been possible for trustees to compare costs between different services because of a lack of clarity and consistency. 

“By introducing a robust way to define and measure the full cost of investing, we have a golden opportunity to make a real difference across the institutional investment market.

The group has published a series of example templates designed to help asset managers report the many layers of costs and charges incurred during the investment process, including those related to transactions, brokerage, custody, legal services and performance fees.

The templates published today cover listed equity, private equity, and real assets. They are the result of the IDWG’s work and build on templates already in use by the LGPS.

After recruiting more members to its board, the Cost Transparency Initiative will launch a series of trials with UK pension schemes and asset managers to test the models.

Christopher Woolard, executive director of strategy and competition at the Financial Conduct Authority (FCA), said: “We welcome the launch of the Cost Transparency Initiative and have passed on the IDWG’s report and draft templates in full.

“The initiative has the right experience, resources and market coverage, and will represent a broad and balanced range of suppliers and clients of the institutional asset management industry to deliver results in the market and continue to build on the momentum created by the IDWG.”

Woolard added that the FCA had been invited to join the Cost Transparency Initiative as an observer.

A spokesperson for The Pensions Regulator reiterated its support for the initiative, saying: “We look forward to working with the Cost Transparency Initiative to raise awareness of the cost transparency templates with pension schemes. This will enable trustees to scrutinise and challenge costs, and to assist them with ensuring that their members have a clear understanding of the costs they face.”