A transparency code for asset managers will soon be introduced in the Local Government Pension Scheme (LGPS) to improve and standardise the reporting of investment costs.
The voluntary code will require managers to report on investment fees in a transparent manner in order to tackle the issue of hidden costs.
It is being developed by the LGPS Scheme Advisory Board (SAB), and is being drafted and tested with help of West Midlands Pension Fund, Chris Sier and the Investment Association.
According to a note of the SAB's website, the code is expected to launch this Autumn following consultation with LGPS funds, asset managers, and the Chartered Institute of Public Finance and Accountancy (CIPFA).
Asset managers who sign up to the code will be listed on the board's website and be able to use the code's logo on their marketing literature.
While it is voluntary, managers that provide services to the LGPS will be encouraged to sign up to demonstrate their commitment to transparent cost reporting. It is hoped this will create a gold standard in cost reporting across the scheme.
Signing up the code involves supplying requested information listed in a template in the format requested and in a timely manner.
The template lists a series of broad headings for reporting costs and expenses.
In its initial form, the template will concentrate on areas which should already be available but may not have been supplied by managers either proactively or in a format easily useable by LGPS funds.
Managers would further agree to the data being checked by a third-party to ensure they continue to comply with the code's requirements.
The template is expected to develop over time to cover other more challenging areas of cost transparency and will remain flexible to adapt to changes.
It comes after reported investment costs increased significantly across the LGPS last year, because around 20 funds adopted CIPFA's new voluntary accounting standard which requires higher disclosure of these costs.
Some funds cited issues in getting asset managers to hand over the data, and also faced challenges in analysing data they did receive due to a lack of standardised format. It is hoped the transparency code will help to improve matters.
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