Investment managers are taking the initiative on transaction cost transparency, while the tide continues to turn against soft commissions among pension funds, according to research sponsored by Instinet Europe.
The survey was conducted by Richard Davies Investor Relations (“RD:IR”) and examines the rate and direction of change in the UK pensions industry with regard to the recommendations set out in the Myners Review of Institutional Investment published in 2001.
RD:IR interviewed 101 UK pension funds, representing funds under management of £312 billion and 48% of the assets held by National Association of Pension Fund members in the UK.
The survey reveals that it is the investment managers, rather than the pension funds, that are driving forward transparency on transaction costs. The number of pension funds requiring their investment managers to split transaction costs from management fees fell by 1% from 2003 to 54% of respondents. Yet there has been a marked increase in the number of investment managers and brokers that break down costs without it being demanded by the fund. Ten per cent of respondents said that although they had never requested them to do so, their investment manager had separated costs of their own accord.
The research also detects a hardening of attitudes over soft commissions. Only 3% of respondents thought soft commissions should stay as they are and 97% thought they should either be banned, more highly regulated or subject to full disclosure.
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