A number of major asset managers are understood to be planning to sign up to the new local government pension scheme (LGPS) cost transparency code.
The code was launched at the recent Pensions and Lifetime Savings Association’s (PLSA) local authority conference and was developed by the LGPS advisory board and the Investment Association. The code is voluntary for asset managers, but is expected to become best practice within 12 months or so. It requires managers to present costs in a standardised format, showing their direct and indirect fees and transaction costs. In the past, making direct cost comparisons between asset managers has been complicated by the complexity and opaque nature of investment costs. In addition, where investors have used their scale to negotiate lower costs, they may prefer to keep these details confidential.
It is understood that Legal & General Investment Management (LGIM) and Baillie Gifford have signed up to the transparency code, while others, including BlackRock, Schroders and Goldman Sachs Asset Management, are also planning to do so. The LGPS advisory board said that the move to greater fee transparency and consistency is important for the LGPS to be seen as a value-led and innovative scheme. Transparency is also a target for the revised CIPFA accounting standard and the government’s criteria for asset pooling.
Asset managers following the code will have to submit a template breaking down their costs to their LGPS clients, both in pooled funds and with segregated mandates. Different templates will be used for listed and unlisted assets, as well as pooled and segregated mandates. The templates were drafted and tested with the help of the West Midlands Pension Fund, Dr Chris Sier, who has worked with Dutch pension funds on cost disclosure, and the Investment Association.