UK - Investment managers are driving forward transaction cost transparency while pension funds crack down on soft commissions, new research on the UK pensions industry shows.
“Taking the temperature of the UK pension fund industry”, a study conducted by Instinet Europe, found it is the investment managers, rather than the pension funds, that are monitoring transparency on transaction costs. More than 48% of respondents claimed they required their investment managers to manage their costs, an increase of 10% since 2003, Instinet said.
In addition, 97% of respondents thought soft commissions should either be banned, more highly regulated or subject to full disclosure. The number of funds permitting their managers to use soft commissions had dropped by 10% to 42%, the research revealed.
Instinet said the number of funds comparing the transaction costs of different managers had increased to 43%, along with 48% expecting their managers to demonstrate that they were trading at best value.
Some 10% of respondents said their investment manager had separated transaction costs from management fees on their own accord while the number of funds insisting their managers split the costs dropped 1% to 54%.
The study was conducted to examine 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.
Commenting on the research, Natan Tiefenbrun (pictured), president of the international division of Instinet LLC said: “Myners emphasised the importance of pension funds making the most of their resources. This requires a clear understanding of the costs the fund incurs from both management fees and broker commissions.
“Pension funds increasingly demand a commitment to transaction cost control and it appears that it is the investment managers who are increasingly driving transparency in reporting.”
The research took into account 101 UK funds, representing 48% of the assets held by National Association of Pension Fund members in the UK.