IA launches transaction cost paper ahead of governance deadline

The Investment Association will launch its long-awaited discussion paper on transaction cost best practice in ‘the coming weeks’, the trade body’s chief executive said today.

The Investment Association has published its long-awaited discussion paper on transaction cost best practice.

It comes two months ahead of a April 2015 deadline that will require workplace pension trustees to adhere to new governance standards on fund investment arrangements.  

These include an obligation to regularly assess the value of transaction costs and charges in a portfolio, and appoint a chairperson with responsibility to monitor them.

Daniel Godfrey, chief executive of the recently rebranded Investment Association (IA), told The TRADE on Monday that the group would be publishing the paper, which would “set out our whole approach to costs, charges and transparency”.

He said: “On portfolio turnover rate, we are also setting out ideas for how typical spread can be best estimated. Pricing on spread, looks like a good and meaningful way of doing it.  

“Our view is that we have a responsibility to disclose and explain every factor that has an outcome on returns. That doesn’t mean for us to create a magic ratio because we don’t think one exists.  

“It does mean ‘here are what the direct costs are, and here are what the historical costs have been’.  There is the performance that we have achieved and here is how it was delivered.”

The IA’s decision to publish a discussion paper on trading costs follows a similar project it conducted last year, when Godfrey called on members to offer fund management costs ‘in pounds and pence’.

Neil Bond, partner at Ardevora Asset Management, said trustees had already started responding to their new obligations ahead of the April deadline.

He said: “The RFPs (Requests For Proposals) are a lot more detailed than they used to be. They ask us for quite some detail, although a lot of the questions are very similar.”

Asset managers have faced many months of criticism from the Financial Conduct Authority and consumer groups about the limitations of its figures on fund charges.

The paper can be downloaded from the IA’s website here.

 

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