Paul Myners' review on institutional investment has been criticised in a new report by his own firm, Gartmore.
A report prepared by Gartmore’s global institutional account director Nigel Down said proposals to reform the relationship between fund managers and brokers were “counterproductive”.
The Myners review, published last month, said broking commissions paid by fund managers and passed to pension funds should be treated as a business cost.
It claimed this would put an end to soft commissions, the traditional practice in which brokers contribute to fund managers’ costs in return for their custom.
The report by the Gartmore chairman warned: “The possible ramifications from this are extensive. The commission system is not unique to the UK and we see significant difficulties in the UK going it alone on commissions.”
The investment management house admitted it had engaged in soft commissioning in the past but assured its clients that it operated a comprehensive, rigorous system for assessing the brokers.Down’s report did agree with the bulk of the Myners review and accepted the commission system should be scrutinised to ensure pension funds do not overpay for brokers’ share dealing and research services.
It said: “We need to come up with either better ways of achieving the aims or sound reasons why they should not be enshrined in the new code.”
The report will be distributed to Gartmore executives next week before being released to the public.
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