RK WON’T TELL YOU. den fees, perhaps the most important question is how large are these fees? Recent work to improve transparency in fees by the West Midlands Pension Fund (WMPF) and the British Rail pension scheme has resulted in significant increases in disclosed costs. By changing the cost-reporting framework, WMPF saw an increase in reported annual fees of 70 million pounds or around 60bps. Using a similar approach, RPMI saw management costs increase by GBP230 million or over 100bps per annum.
The COO of a very large UK asset manager recently told us that he didn’t want to independently measure his FX costs because he had no actual FX costs. After a little persuasion we established that his FX costs are actually higher than his Equity and Fixed Income brokerage bills combined! As long as he remained unaware of those costs, he was unable to reduce them – but now he’s saving millions of dollars a year, and can show clients the benefit.
Clearly costs matter. But the work being done by WMPF and RPMI is unlikely to lead to greater adoption by the fund management industry without the support of regulators. If costs are not a problem, let’s disclose them and let investors decide.
Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times
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