Managed investment schemes must deliver value for money to their investors

Jun 30, 2021
A very British precedent

Over quite a number of years now, the United Kingdom has been developing a sophisticated and substantial legal and regulatory machinery to deal with the question of whether managed fund fee charges represent VfM.  Part of this mechanism that came into force in September 2019 required that from January 2020 authorised fund managers (AFMs) must publish yearly in summary form their mandatory annual assessment of the overall value that their authorised funds (ie., authorised open-ended collective investment schemes/CIS) deliver to investors.  The idea behind this requirement, introduced by the Financial Conduct Authority (FCA) in its April 2018 Policy Statement PS18/8, entitled Asset Management Market Study remedies and changes to the handbook – Feedback and final rules to CP17/18, is to ensure that AFMs provide meaningful VfM public domain information that will beneficially influence the behaviour of retail investors, professional investors, advisers and their representatives.  PS18/8 could potentially provide a template for some similarly explicit VfM disclosure rules applying across MIS in New Zealand.

In the policy statement, the FCA sets out its case for the necessity for fund managers to perform VfM analysis and to communicate this information to their investors:

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The CTI has published online a set of open source standardised templates that fund managers and others are free to download and fill out when undertaking VfM assessments.  Its home page succinctly sets out its mission:

Welcome to the Cost Transparency Initiative, a new industry standard for institutional investment cost data. The availability of comprehensive and transparent information on costs and charges is important in helping investors to decide whether investments represent value for money. We've created a set of templates and tools which together form a framework investors can use to receive standardised cost and charges information from asset managers.

Along with the templates, which are open source and free to download, we also provide guidance for pension schemes and their advisers on how to make use of cost information, and for asset managers on how to provide cost information to their clients.

Standardisation and consistency are important values for the CTI to propagate in respect of VfM data collection, assessment, and investor reporting.  A sample template of note is the Main Account Template, which is offered in three versions: PDF,  Excel, and machine readable.  This template is designed to be completed by “Asset managers or relevant service providers.”

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