Stephanie Baxter says the IC Select performance standard is an important step towards greater transparency, but wonders if it goes far enough
While the fiduciary management market has grown by around 25% year on year since 2013, it has also attracted regulatory scrutiny - there have long been concerns that selection procedures lack transparency and deliver performance disappointments; and that trustees have struggled to compare managers because they ask for different approaches to hedging and allocating assets.
This has led to accusations that managers cherry pick performance data to look attractive during tenders.
This week, IC Select launched its highly-anticipated performance disclosure standard, which will arm trustees with more information during the tender process. Backed by 14 fiduciary managers covering 99.9% of the UK market, this is a huge step forward after three years of talks. For the first time, trustees will be able to get consistent performance information when selecting managers, and help them choose the right one for what they are trying to achieve.
The scrutiny of fiduciary managers and investment consultants by the Financial Conduct Authority and its subsequent referral to the Competition and Markets Authority (CMA) have clearly acted as catalysts in the development of the standard.
IC Select's Peter Dorward tells PP that managers realised this wasn't going to go away, but that there has not been reluctance from managers.
The firm is not mandating what the composites should look like; instead, managers will compile their own composite data using IC Select's guidelines. It hopes the standard will emulate the Global Investment Performance Standards - where standards are laid down through the CFA Institute for strategies put together by asset managers. Dorward hopes regulators will agree that the market will find its own level eventually.
While the standard is certainly a huge step in the right direction towards greater transparency and should be embraced, whether it goes far enough remains to be seen.
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