'More needs to be done on costs'
Many large fund management companies in the UK are not measuring their ability to obtain the best prices when buy and selling shares for their pension fund clients, says Piers Bertlin, European partner at consultancy firm William M Mercer.
The comment comes as Mercer publishes its survey on transaction costs within the fund management survey, which it conducted following the Myners Review recommendation that pension funds start looking more closely at the costs and commissions they pay to the investment fund community.
“We feel that more could be done by fund managers with respect to restructuring their costs and our survey shows this,” says Bertlin.
The report shows that only 13 of 29 respondents said they use third party measurement services and Mercer says this shows that some managers are not fully aware themselves of the costs their services incur.
The news follows the unveiling at the National Association of Pension Fund’s recent investment conference by the Investment Management Association of its new transaction costs code of practice, and comments by Paul Myners himself that this is an area of his review that is likely to fail.
However, Bertlin says that Myners was a perhaps a little harsh in his condemnation of the fund management community in this area and that some progress had been made. “Our survey does show that there has been some positive reaction to the Myners recommendation that transaction costs be overhauled. It is encouraging to see that some managers are making use of crossing networks and managers are gradually abandoning the use of soft commissions, to such an extent even that those who still “soft” are in a minority now. The draft disclosure code is very much a move in the right direction. We should applaud the fund management industry for taking the initiative,” he comments.
Bertlin says that Myners’s comments that there was still too much resistance on the part of fund managers to look at costs was also going too far. “Sure some could be doing more, but establishing just what the various costs are is a demanding process and having to do it in two years is a narrow time-frame. It’s coming round quickly, we’re already half-way through.”
Moreover, nobody has yet been able to speculate on the time and costs involved in setting up systems to measure costs, Bertlin points out.