Express fund costs as single number, says trade group

Purse vice pound coinsFund providers should show an 'all-inclusive, pounds and pence number' representing the cost of holding units in a fund if they want to win back investors' trust, says a UK trade organisation.

The Investment Management Association (IMA) proposes that every UK authorised fund should contain tables in its annual report that show performance, management costs and transaction costs per unit — and combine these measurements into a single figure, expressed in local currency.

“Investment funds now have a long supply chain and this has meant that there is a complex set of costs borne by funds,” says Daniel Godfrey, chief executive of the IMA. “Because it’s complex, it looks opaque and this has been a real issue for the industry in an environment where trust in financial services in general is low. We need to ensure that no reasonable observer can accuse the industry of 'hiding' charges and that our clients are well informed both about total cost and performance.”

The proposal, which is the result of a consultation on the IMA's statement of recommended practice for annual fund reports, would not by itself reflect the full cost of owning a fund. The IMA says it will encourage fund distributors and advisers to overlay their own charges in a way that helps the end investor understand the cost of their investment.

In this effort, the IMA's aims are likely to align with the retail distribution review (RDR) in the UK, which bans trail commission and forces advisers to be more transparent about their charges.

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