UK public pensions launch investment cost transparency drive
The UK’s local government pension scheme (LGPS) has launched a cost transparency code for asset managers.
The £217bn (€253bn) system – which includes 89 pension funds for local authorities in England and Wales – announced the code at a Pensions and Lifetime Savings Association (PLSA) conference today.
It is based on templates introduced by the Investment Association (IA), the UK’s asset management trade body, earlier this year, and has been backed by the LGPS advisory board and the Local Government Association.
Managers that sign up to the transparency code would agree to supply information using the IA’s templates in a timely manner, the advisory board said on its website. An independent third party would then be responsible for checking and collating the data.
The templates currently apply only to listed assets, but Roger Phillips, chair of the advisory board, said it was working with the IA and other parties to adapt them for use with unlisted assets such as private equity.
Phillips said: “The important thing to recognise is that this is a voluntary code. But in 12 months, you’ll want an extremely good reason why your manager hasn’t signed up to it.”
The LGPS plans to develop a similar transparency code for alternative asset classes such as private equity, Phillips added.
He warned that the push for transparency was likely to lead to increased explicit levels of costs as reporting standards improve, and urged LPGS staff to be prepared to explain and contextualise the figures they report.
Chris Sier, professor at Newcastle University who helped develop the models, said with the backing of the LGPS the models could have a significant impact on the asset management industry.
Sier told the conference: “The LGPS is a £217bn asset pool that is thinking collectively. This pool has the opportunity to do something for the entire UK market; every consumer that has a pension fund. What you adopt, the chances are it will be adopted market-wide.
“The call I want to present to you is that if you get this right, it turns over the entire marketplace in the UK and makes it transparent. That’s not £217bn, that’s £3.5trn. You would have a significant impact on the lives of all consumers in the UK that have pension funds.”
Sier said he was working with an unnamed provider to establish an independent body to oversee the data and keep it at a high standard. The body would be non-profit and funded by both asset managers and asset owners, he added.
IPE’s Special Report into fees and costs is available here.