New asset management template could impact mandate wins

The Cost Transparency Initiative follows recent requests from institutional investors to asset managers for templates on costs and fees.

By Charles Gubert

A refusal or failure by asset managers to supply their clients with the Institutional Disclosure Working Group’s (IDWG) template, a standardised – albeit voluntary – transparency document outlining costs and charges, could result in investment mandates being lost or forfeited, according to the IDWG’s former chairman.

The template –known as the Cost Transparency Initiative– and will be overseen by an industry group comprising organisations such as the Investment Association and Pensions and Lifetime Savings Association.

The genesis of the initiative can be traced back to the UK’s FCA’s Asset Management Market Study, which argued institutional investors often found it difficult to obtain information from managers about costs and charges, prompting the regulator to establish the IDWG led by Professor Chris Sier.

Sier, who is now running ClearGlass, a data start-up company, said institutional investors were already putting in requests to managers for templates, and he expected more will follow.

He added managers will eventually be expected to complete the templates as part of best practice.  This comes as many asset managers find it increasingly hard to generate returns and stem outflows following a period of intense volatility, making it eminently possible institutions could demand the template as a precondition for investment.   

Some asset managers have already begun building infrastructures to systematise and automate the data collection processes in anticipation of receiving templates from clients. In addition, Sier said the initiative might even be a commercial opportunity for custodians and fund administrators, many of whom will have possession of the necessary data sets, and could provide a service to managers by filling out the templates on their behalf.  

The superfluity of different standardisation initiatives has long been an inhibitor for asset managers, who routinely complained they were sending clients duplicative information in different formats propagated by various industry bodies, such as benchmarks and consultants.

“Asset managers have said for a long time that they only want to fill in a single template, which is one of the drivers behind the Cost Transparency Initiative,” said Sier.

Nonetheless, Sier highlighted a number of the existing cost disclosure templates – such as the Institutional Limited Partners Association (ILPA) fee reporting template for private equity managers – have been incorporated into the Cost Transparency Initiative.

“The ILPA standard was incorporated into our work although the IDWG did create its own Private Equity Template to supplement the ILPA template as there are regional differences between how some data points are calculated in the UK compared to the US,” he acknowledged.