UK - Software provider Euraplan has launched a new foreign exchange service which allows pension schemes to address Myners' call for greater transaction cost transparency.
The new service allows schemes to make accurate assessments of the forex rates they are charged by their custodians or fund managers. All pension schemes investing outside the UK are involved in forex transactions when they buy and sell foreign investments, an area largely ignored by many schemes, said Euraplan. Katherine Lynas, an associate director of Euraplan, said: “For most schemes, forex transactions are totally opaque, despite being a major cost to them”
“Our research suggests that many schemes are not even aware of the volume of foreign exchanges undertaken in a typical quarter on their behalf,” she added. Lynas uses the example of a pension scheme with £1.3bn in assets under management and 30% invested overseas.
She estimates that with around £400m foreign exchanges every quarter, if the fund is being charged approximately one basis point on each of these transactions then it would be losing a total of £160,000 per annum.
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