UK’s IMA pushes consultation on reporting of UK authorised funds

New standards for reporting costs and valuations of units in UK authorised funds have been proposed by the Investment Management Association in the UK.

As a key policy being pursued by the trade association’s chief executive Daniel Godfrey, the intention is to enable investors in the UK to understand in “pounds and pence” what the cost of holding units in a fund has been, and which they can use to compare investment returns.

The consultation is being proposed through the “Statement of Recommended Practice”, or Sorp, which proposes authorised funds should provide information on the performance per unit, charges per unit for managing and operating the fund, and the amount per unit for all transaction costs incurred when the manager buys and sells holdings on the fund’s behalf.

Godfrey wrote in a note that: “Customers will be able to dig deeper if they wish. The charges will be broken down to show the Annual Management Charge and all other charges for administration and operating the fund. Together these charges make up the ongoing charges figure. The transaction costs will be broken down into tax and dealing costs, with the dealing costs further sub-divided into execution and research costs.”

“Investment funds now have a long supply chain and this has meant that there is a complex set of costs borne by funds. 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.

“We’ve had terrific support for this initiative from our Members and external stakeholders and I hope that, if the details are agreed for the Sorp by the end of the year, we will start to see the data being introduced in the course of 2014.”

The IMA plans to build on the Sorp work to also develop total cost of ownership models that account for product wrappers, financial advice, and distribution.



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