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Calls for single value for money measure for fund managers

The Chartered Financial Analyst Society has called for more transparency in the UK’s investment sector to increase public trust in the industry.

The professional body has proposed a unified framework for assessing value-for-money investing.

Apples and oranges

Existing regulations require defined contribution pension scheme trustees, independent governance committees and boards to UK authorised funds to regularly assess value.

However, these requirements differ slightly which, according to CFA UK, leads to confusion in the sector.

CFA UK argues that value for money metrics would benefit from unifying these requirements, as a more consistent framework for assessment could make it easier for investment professionals to demonstrate their value to clients, and thus increase public trust.

The CFA has called for a clearer taxonomy and has proposed a model framework for assessment that is designed for all funds. The suggested framework is based on three pillars:

  • costs and charges
  • output, defined as both risk and return
  • and quality and service.

The paper recommends using a single way of monitoring the value, showing performance retrospectively in order to stress long term over short term gains.

The CFA ends also lists eatures for which clients may be willing to pay a premium, for example the quality and effectiveness of asset stewardship, or a deep integration of ethical, social and governance criteria into the investment process.

CFA UK chief executive Will Goodhart says: “We need to develop a better framework for assessing value for money to improve transparency for the end investor and enable effective comparability between providers.

Working out if a fund is value for money

“We’re pleased to see that the profession is increasingly focusing on value. Given the FCA’s incoming requirements, this is an issue everyone should be thinking about now, in order to prepare.”

CFA UK professionalism advisor Andrew Burton says: “Establishing a consistent means to address value for money is challenging, especially given that perceptions of value are subjective.

“The incorporation of a robust ESG evaluation process, for instance, will be valued by some end-investors even though it comes with additional cost, but it may be a lower priority for others.

“We don’t see a solution in introducing a single metric for value for money, but implementing this framework across the UK investment profession would go a long way to addressing the confusion and inconsistency that we currently see.”


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