14 asset managers have now signed up to the LGPS code of transparency on costs and fees, covering over one-third of the LGPS assets of approximately £260 billion.
The managers range from very large firms, such as Fidelity and Legal & General, through to smaller and more specialist outfits, such as Pyrford International, Markham Rae, Montanaro and Trilogy Global Advisers. Middle-ranking fund managers such as Investec, RWC Partners, Baillie Gifford and Capital International have also signed up, along with the Local Pensions Partnership, the asset pooling partnership set up by the London Pension Fund Authority and Lancashire County Pension Fund. Local Government Association head of pensions, Jeff Houston of the Local Government Association, said that two more large managers, BlackRock and UBS Asset Management, are expected to sign up shortly.
Houston said that signing up to the transparency code, which promotes better reporting of investment cost and fees by managers, will become a requirement for managers seeking business from local authority pension fund. “The managers have agreed to follow the cost disclosure template as it develops, as it is a living template. There will also be third-party checks on transparency data, and a procurement process for a third-party checker has started. Managers will have a 12 month grace period, but once the system is up and running, if they fail a check, managers will be publicly removed from the list, which is their incentive to fulfil the code’s requirements.”
Houston said that the LGPS code of transparency and the template for disclosing listed asset costs and fees for both pooled funds and segregated mandates, was developed by West Midlands Pension Fund, independent fees expert, Chris Sier, and the Investment Association. He added that the Investment Disclosure Working Group, set up by the Financial Conduct Authority, is expected to build on the work already done, with its own transparency code expected to develop on the same lines as the LGPS code.
“West Midlands deserve a lot of credit for going first on this. The changes to how they have reported their costs show costs going up significantly, but they have chipped away at this and have saved £4-5 million a year by disclosing their full costs. Funds should be working with their managers on this and having proper discussions, rather than using it as a stick to beat the managers,” Houston said.