SCM Direct said it applauds Woodford Investment Management’s recent decision to absorb the research costs from management fees rather than passing these onto clients, and has long thought this should be the case for all funds.
The firm said “it remains a scandal that the UK fund industry shows no willingness to behave ethically regarding transparency of these research costs; as well as overall transaction costs.”
It is also “exceptionally poor” that the Financial Reporting Council has allowed the investment the Investment Association to set its own accounting standards, and abandon the Portfolio Turnover Rate (PTR) after June 2012, which SCM said is “crucial” in calculating the transaction cost.
SCM Direct said that IA figures show total funds under management for UK domiciled funds investing in equities amounted to £524,266m at the end of 2015, with tracker funds representing 12.4% of UK domiciled funds and active funds 87.6%.
SCM used data from Fitz Partners together with the Woodford’s statistics to calculate the 0.38% per annum and £1.75bn figures.
The firm also noted that the introduction of MiFID II in 2018, will force the UK industry to be transparent as regard all charges, but until that time, pressure needs to be placed on fund managers to “stop hiding fees and misleading their clients as to the impact of fees.”
“It is a travesty that the UK regulator refuses to enforce a common template of all charges published at the point of sale, even after this new legislation takes place in 2018,” said Gina Miller, founder of SCM Direct and the True and Fair Campaign. “Such a decision would allow consumers to easily compare one fund or most other forms of investment, with another.”
