The Investment Association's (IA) report on hidden costs and charges has been blasted as "amateurish and totally misleading" in a damning attack from the industry.
The report, published 9 July, argued there was no evidence to support accusations that hidden costs and charges were damaging investment returns. The IA stated the charges were the "Loch Ness monster of investments".
However, some industry officials have questioned the accuracy of the report, arguing the analysis fails to take into account a number of additional factors, such as the spreads of securities and survivorship bias.
SCM Direct founding partner Gina Miller, who also runs the True and Fair Campaign, said the "research paper is not worth the paper it is printed on".
She said: "This research shows a leopard never changes its spots. This report is as amateurish and as totally misleading as the Investment Management Association's previous attempt in 2012 to somehow prove the impossible.
"Of course, over the long-term the returns from investment after costs must equal the market returns less all the costs (including transaction costs). Selecting arbitrary time periods or funds does not change this basic fact.
"Instead, the IA has taken... a convenient time for analysis in which many active funds fared well due to their inherent small/mid cap bias. They have also ignored completely the spread element of transaction costs and survivorship bias."
Hargreaves Lansdown senior analyst Laith Khalaf also questioned the timeframe investigated by the IA.
He said: "There is a genuine question over the correct presentation of these charges, because they are variable, and so an annual calculation may give a misleading impression of the regular costs to investors.
"Events like manager changes and extreme fund flows can create spikes in turnover and transaction costs, despite being non-recurring by nature."
A spokesperson for the IA refuted the claims, arguing all factors were accounted for in its report.
They said: "All costs are accounted in the analysis. Implicit costs such as spread are accounted for and are illustrated in the returns.
"We did not cherry pick any data. We used all the data available from Fitz Partners (fund research company). The question around midcaps is relevant particularly for UK equity funds, but our analysis looks across 16 equity sectors so the small/mid cap argument cannot explain the results in their entirety.
"The data used includes closed funds so they have been accounted for and not disappeared from the analysis. If a fund is closed, it cannot grow in terms of new sales and therefore, the data is not skewed by ‘popular funds' or ‘survivorship bias'."
Nevertheless, the document has proved controversial with some figures questioning whether the IA was the right body to investigate the figures.
Miller added: "The fact the Financial Conduct Authority has deferred its responsibility in terms of cost transparency to the conflicted amateurs at the IA is utterly shameful and should be halted immediately."
It is not the first time the IA's involvement has been criticised. Brighton Rock Group head of research Dr Con Keating described the IA's advisory board on cost transparency as "a case of the poacher writing the rules".
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