LGPS Transparency Code
Counting the costs
31 Jul 2017 - Estimated reading time: 2 minutes
Counting the costs
In the second quarter of this year, the Scheme Advisory Board launched its Transparency Code (“the Code”). The Code’s aim is to help LGPS Funds obtain the relevant data to allow them to identify and report their asset costs on a consistent basis. The Code, which is voluntary for investment managers to sign up to, is based on a template introduced earlier this year by the Investment Association.
So, what is it?
The Code requires that signatories report, in a standardised template, transaction costs, broker commission, exit and entry charges from assets, and all other fees paid to third-party funds on top of standard investment management fees. The Code’s aims to achieve more explicit reporting of investment manager fees and costs, so that LGPS Funds are better placed to more accurately measure the true cost of their assets, whilst nudging along cost competition amongst managers in the UK marketplace.
Signatories so far
Despite the Code being voluntary, it has gained traction with 12 managers signed up (at time of writing) representing around 30% of LGPS assets. More managers are expected to sign up over the coming months (a full list is included on the Scheme Advisory Board website).
We also understand that at least one of the pools has signed up and managers’ compliance with the Code is likely to be included in future tender docs for the pools in question.
In the pipeline
At present the Code’s template focuses on listed securities only, but talks are underway with managers of unlisted holdings (e.g. private equities) as to how a template can be developed to cover a wider range of the investment universe.
We welcome the Code and remain supportive of all the efforts to improve the level of cost transparency for LGPS Funds. We recommend Funds encourage their managers to sign up to the Code and get a formal response from any that decline to sign up.