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IMA rejects Sandler view on fund charges

The IMA has rejected the Sandler review team&#39s conclusion that there is no correlation between fund charges and performance, saying the evidence presented to Sandler points to an opposite conclusion.

Having had access to the same data upon which the review team based its conclusions, the IMA says there is a distinct relationship between the cost of a fund and its subsequent performance.

On average, it concludes, that for every 1 per cent increase in fund cost there is a 2.5 per cent increase in performance.

Looking at the cheapest fund in the data, it concludes that 75 per cent of the funds with higher charges have outperformed it.

The data from Standard & Poor&#39s was analysed for the review team by consultants Booz Allen Hamilton. The data tracks gross annual UK unit trust performance over the last 10 years.

The Sandler report said: “The retail savings industry is characterised by a lack of correlation between price and performance, consumers are often paying premium prices without receiving superior performance in return.”

IMA chief executive Richard Saunders says: “We find it puzzling. This is one of a number of points that we will be raising with the Treasury about the analysis. We do not think these arguments really stack up and we want to engage them in a debate about that.”

A Treasury spokesman says: “It clearly shows in the report how there is no correlation between performance and charges.”

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