The Local Government Pension Scheme advisory board has launched its code of transparency to improve cost disclosure, amid early indications that asset managers will sign up.
The code, launched at the Pension and Lifetime Savings Association’s Local Authority Conference and developed in conjunction with the Investment Association, is expected by the board to become best practice within 12 months.
The voluntary practice requires managers to present costs in a standardised template, breaking out various types of fees and transaction costs.
If some of them decide to do it then that will put those managers in a better position to win mandates
Andy Agathangelou, Transparency Task Force
Transparency campaigners welcomed the code’s release, but warned that industry-led standards did not replace the need for robust regulation.
The voluntary practice requires managers to present costs in a standardised template, breaking out various types of management fees, indirect fees, and transaction costs.
Liam Robson, a Local Government Association analyst who worked on the code, said that there had been positive discussions with managers throughout the process.
However, he added that it would take time and cultural change to achieve full transparency.
“One of the main reasons for aversion to cost transparency has been potentially commercially sensitive data being exposed to scrutiny of competitors and commentators,” he said.
Companies pledge to sign
BlackRock, the world’s largest asset manager, confirmed its plans to sign up to the code and said it was collecting the appropriate data to comply for the 2018 reporting period.
“From the start, we were supportive of the initiative to provide cost data to our LGPS clients using a common industry standard,” a spokesperson said.
Schroders and Aberdeen Asset Management both expected to comply with the code as it currently stands, while Legal & General Investment Management had the “aspiration of being able to sign up to the Code of Transparency”.
Goldman Sachs Asset Management said it was “actively considering” its stance, while Insight Investment said it supported the LGPS’s work in the area. Several others contacted by Pensions Expert declined to comment at this stage.
Not perfect
The LGPS code is almost identical to the draft guidance published by the Investment Association, launched in March.
FCA throws cold water on IA input ambitions
The Financial Conduct Authority’s director of strategy and competition Christopher Woolard said last October he does not want to be bound by industry initiatives in making new rules for asset managers.
Transparency Task Force founding chair Andy Agathangelou welcomed the LGPS code, but said both frameworks have weaknesses.
“There are costs that we are aware of that are not actually being captured by the code at all,” he said, arguing that the presence of several boxes marked “other” within the template demonstrated that it was not comprehensive enough and was open to manipulation.
Responding to the IA’s consultation on its code, he said it was inappropriate for an industry body, which acts in its members’ interests, to set standards, and called on the Financial Conduct Authority to develop its own rules.
However, he said companies’ decisions to adhere to the LGPS code would set market competition in motion.
