Bestinvest calls for greater transparency following IMA research
Bestinvest has hit back at the Investment Management Association after it released research which claimed there were no hidden fund cost charges.
The trade body analysed the fund accounts of 129 active and passive funds in the UK all companies sector. For the actively managed funds, the transaction costs were 0.31 per cent of average assets, of which two-thirds was accounted for by stamp duty. In tracker funds, transaction costs totalled 0.06 per cent.
Bestinvest senior adviser Adrian Lowcock (pictured) says: “What the IMA seems to be focusing on is whether the funds are expensive and offer fair value, but the issue for investors is they cannot work out whether funds are expensive because they are not told what all their charges are and what exactly they are paying for. Charges are not clear or transparent.”
He adds transparency of charging structure applies to advisers, platforms and fund managers at every level of the investment transaction.
Lift Financial joint chief executive Joel Adams says: “No hidden costs would be expected. The IMA has calculated the total expense ratio, but investors cannot have a flat charge when transaction costs on a year-on-year basis are very different because of portfolio turnover costs. I would be interested to know whether those costs are absorbed or retained by the fund manager.”
A spokeswoman for the Investment Management Association says: “We have taken an average transaction cost over a 10-year period to December 2011. In terms of the portfolio turnover rate, the transaction costs are based on the number of buying and selling decisions and the manager makes them in the interest of getting a better return.”
She adds: “Cost of investing is pretty much equal to TER because trading costs are negligible.”