THINGS ARE LOOKING UP
The years spent demanding information on behalf of schemes has led Sier to develop a standard template for investors to send to potential and existing managers. Based largely on the reporting standard currently used in the Netherlands, Sier’s standard template sets out the basics for schemes requesting data from prospective and existing managers.
The template is available online for anyone to access, but crucially will be adopted by LGPS schemes and used in all future dealings with fund managers this Autumn. The decision will mean asset managers will be facing pressure from some of their biggest clients – increasingly so as funds continue to pool their assets.
“The move toward investment fee transparency and consistency is seen by the board as an important factor in the LGPS being perceived as a value-led and innovative scheme, a spokesman for the LGPS Scheme Advisory Board says.
“To assist LGPS funds in obtaining the data they require in order to report costs on a transparent basis the board is working to develop a voluntary Code of Transparency for LGPS asset managers.”
Those asset managers who sign up to the ‘Code of Transparency’ will be listed on the board website and able to use the code logo on their marketing literature. The code will be voluntary with asset managers encouraged to sign up to it to demonstrate their commitment to transparent reporting of costs.
So are we at the start of a brave new – and transparent – world? Not quite. Getting asset managers to provide their data will be a huge achievement, but that’s really just the start.
GETTING THE DETAILS RIGHT
The Netherlands is ahead of the curve in this area, with schemes collecting data from their managers and then delivering it as a spreadsheet to the regulator.
The process, however, is deeply flawed and open to abuse, says Sier.
“Pension funds themselves lack the expertise to verify the data coming from the asset managers, so they put in a spreadsheet and pass it on to the regulator in good faith, but the original data is wrong,” he says.
“Asset managers are submitting bad data. It’s easy to make mistakes with percentages and basis points, but the degree to which it happens is suspect. We don’t want that framework in the UK.”
We are heading in the right direction, but given the stakes involved it is likely to be a painful but necessary process for the industry. Mistakes and scandals will still occur, but in the cold light of day we will be able to see more of them coming.
As Hitchen points out: “ [While] transparency isn’t necessarily a panacea, the opposite of transparency is definitely a problem.”
You can find Chris Sier’s template at www. lgpsboard.org/index.php/structure-reform/cost-transparency
