A new disclosure code to be introduced in the UK will revolutionise the level of transparency over the fees UK fund managers charge their pension fund clients.
According to a report in today’sFinancial Times, the Investment Managers Association (IMA) and National Association of Pension Funds (NAPF) is expected to pass the Pension Fund Disclosure code this week.
“It is a very significant step. For the first time, there will be full disclosure for pension funds in how their money is being used,” IMA chief executive Richard Saunders said.
The code follows the review conducted last year by Gartmore former chairman Paul Myners on institutional investment and comes in the wake of the 1988-1994 mis-selling crisis which involved life agents selling inappropriate pension products to clients.
According to the report, concern in the UK has been growing among the government and the fund management industry following the fall in stock markets and the prospect of lower returns.
It says last month, a survey byWilliam M Mercerof 29 fund managers controlling more than 500 billion pounds of assets, found that 13 did not measure how of their clients money they spend when trading on the stock market.
The code is to split disclosure into two levels. The first will be an annual statement by fund managers of their policies and processes on cost.
It will include a description of the rationale behind the choice of stockbrokers and dealing practices; policies on the use of soft commissions and ‘commission recapture’; how the fund monitors and maximises dealing efficiency to reduce execution costs; conflicts of interest; and external research.
Also to be considered is the extent to which securing allocations of equity in floatations and underwriting influences trading patterns and policies on custody services, deposits and foreign exchange transactions.
The second level of the code will require fund managers to present a spreadsheet to the pension funds outlining trading volumes, commissions and fees.
