| Pension schemes and fund managers to develop new code on trading costs |
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| 01/11/2001 | |
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by Nat Mankelow A new Disclosure Code on trading costs for fund managers is to be developed jointly by the National Association of Pension Funds (NAPF) and the Fund Managers' Association (FMA). The move follows calls from Paul Myners in his government-sponsored report on institutional investment for pension fund trustees to press fund managers on the thorny topic of equity trading costs. The code builds on the ten 'sample' questions originally devised by Myners for pension fund trustees to ask their fund managers with regard to soft commissions and other less transparent costs. The use of soft commissions – where brokers contribute to fund managers' costs typically in the form of research in return for business – has been criticised by Myners, saying it lacked transparency and undermined fund managers' incentives to cut costs. However the Fund Managers' Association said recently that an all-inclusive fee structure, proposed in the Myners report, would do little to optimise the trade-off between share trading costs and best execution. Alan Rubenstein, chairman of NAPF's Investment Council, said: "At a time when many in the pensions industry still have concerns about parts of the Myners report, this project with FMA will provide a practical framework to help trustees and their managers." A working group with representatives from NAPF and FMA – a strong critic of Myners' recommendations – will develop the new code as part of a regular review process for the pension fund industry. Lindsay Tomlinson, chairman of FMA, added: "We believe that there is a need to improve transparency in trading costs and we hope the new code will achieve and industry wide standard whilst not prescribing an onerous disclosure regime." NAPF's Alan Rubenstein also called for "common sense" to prevail within the industry – currently valued at £850bn – if its problems are to be solved in the long run. |
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