Fund fees set to increase post Walker

The document, published this month, outlines stringent recommendations for fund managers on ensuring companies in which they buy stock are well managed on behalf of investors.

But schemes requiring their fund managers to adhere to the code – which has the support of the National Association of Pension Funds (NAPF) – will have to carry the additional costs of greater scrutiny of companies, most likely in higher fees.

One of the review’s stipulations is for managers to put the same diligence into underweight stocks in their funds as others, so it also has particular implications for passive management, which currently accounts for around 33% of UK scheme investments.

Adam Steiner, chief executive of SVG Investment Managers, accepted the move would prove costly in the short term and added: “If this does put fees up, trustees that support these proposals might question whether passive investments are still cheap enough to be worthwhile.”

NAPF corporate governance chief David Paterson welcomed the review as “a material advance on the Institutional Shareholders’ Committee principles first published several years ago”.

But he warned: “Implementation of the code does present some challenges for pension funds of all sizes.”

“As a first step, funds should re-examine their approach to stewardship, and discuss with their advisers and investment managers how to best apply the Code’s provisions to their own particular circumstances.”