Alan Miller’s ‘True and Fair Code and Labelling Scheme’

6th February 2012

The IMA and a number of fund management groups have hit back, suggesting the campaign misses the point. But the campaign raises a wider debate on what investors really want from their fund managers. Is transparency of cost and underlying holdings really likely to shore up trust in the investment management industry?

Miller has argued that a lack of transparency throughout the investment management industry has led to a loss of consumer trust and confidence. He claims that his new scheme will allow investors, for the first time, to compare investment products and providers with a clear breakdown of costs and fees: "Miller said the new code will provide 100% transparency by showing the whole range of fees and the resulting all-cost for investment, which will be known as the Total Cost of Investment (TCI)."

This is a seductive argument. After all, shouldn't consumers know all the costs that are being taken from the fund? The trouble is, they already do. If a fund manager is incurring high costs managing his fund, it will be reflected in performance, which – however much the FSA might wish it otherwise – is still the basis on which many investors buy funds. As Richard Saunders, chief executive of the IMA, suggests: "The costs of trading the portfolio are inseparable from the impact on returns of the associated investment decisions."

Leave a Reply

Your email address will not be published. Required fields are marked *