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.”
Reaction from Cost Transparency Initiative supporters
Julian Mund, chief executive, PLSA:
“The PLSA is committed to taking forward the work of the IDWG and is pleased to be playing a key role in support of its successor body.
“This is a step forward for cost transparency where both schemes and providers benefit from one common, standardised way of assessing and providing costs.”
Chris Cummings, chief executive, Investment Association:
“We welcome the launch of the Cost Transparency Initiative. Our industry is fully committed to transparency of costs and charges for all investors.
“We look forward to working closely with the PLSA and LGPS Advisory Board to build on the progress of the IDWG, to deliver a template which will enable costs and charges to be reported in a clear and comparable manner for institutional investors.”
Cllr Roger Philips, chair, LGPS Advisory Board:
“The LGPS Advisory Board continues to be fully supportive of investment cost transparency initiatives as demonstrated by the introduction of its own Code of Transparency which now covers some £180bn of scheme assets.
“The board is delighted to be part of taking the work forward to the wider institutional space which will enable trustees to make fully informed, value led investment decisions and further trust in the sector by embedding clarity and openness in a previously opaque market.”