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IMA: It’s all about performance (data)


The RDR saw the introduction of new share classes that no longer include trail commissions or platform payments, which have previously been part of the ongoing charges of a fund. 

While the old share classes still exist, flows into the new ones are accelerating, causing the asset pool in the former to shrink. So the question arises as to which share class data vendors identify as the primary share class to calculate performance data in a post-RDR environment.

There is no regulatory guidance and a range of approaches could be adopted. The IMA is consulting on two proposals. 

Option A replaces the pre-RDR primary share class with the highest-charging post-RDR share class. This retains the historical approach as the calculated performance data would show the worst-case scenario and is the more cautious approach. But it would represent the experience of the minority of investors.

Option B replaces the existing commission-loaded share class with the post-RDR share class that represents the highest-charging share class distributed via a fund platform. This reflects the fact that most retail distribution takes place through platforms. This is more difficult for data vendors to administer as they cannot identify this share class automatically. 

Both proposals have benefits and flaws but the key is to ensure the agreed approach provides consistency across the industry.

Feedback is welcome by 29 August. Responses will help decide which option data vendors adopt from 1 January 2015, allowing time for systems and processes to be updated.

Nicola Kembey is head of sectors at the Investment Management Association



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