Investment industry backs Altmann’s bill on costs
Pressure is growing to reform cost disclosure rules for investment companies, as an influential trade body signalled its support for Baroness Ros Altmann’s private members’ bill.
The Association of Investment Companies (AIC) today welcomed Altmann’s intervention, which aims to remove investment companies from the scope of the Alternative Investment Fund Managers Directive (AIFMD).
AIFMD was an EU law introduced in 2013, designed to protect investors in lightly regulated funds – including UK investment firms – and designated them alternative investment funds.
However, subsequent regulations have meant that investors in investment companies are obliged to disclose aggregated fees, which can lead to costs being double counted.
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Altmann’s bill, which aims to undo this error, will have its first reading in the House of Lords on 22 November.
The bill will then be debated and open to amendments before the House of Lords members vote on the bill. It will then be passed to the House of Commons if it has the support of an MP.
“We welcome Ros Altmann’s bill which is set to accelerate action on this crucial issue of investment company cost disclosure,” said Richard Stone, chief executive of the AIC.
“Whilst AIFMD has a broader sweep, this bill provides a way to speed up the process of getting the issue of cost disclosures resolved and reaching a better place for investors and our members. We have been working hard lobbying the FCA and other policymakers on this issue and have called for emergency action as well as a root and branch review of cost disclosure.”
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The trade body has proposed that platforms, wealth managers and advisers should disclose the ongoing charge, including the management fees and directors’ fees, to retail clients.
It has called for investment companies to disclose the ongoing charge as well as separately disclosing transaction costs, any performance fee and gearing costs.
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Where the investment company is held by another investment company or fund, its costs would not be included in that fund’s own cost disclosure, under the AIC’s proposals.
The AIC has 343 members, ranging from closed-ended investment companies, investment trusts and VCTs. The industry has total assets of approximately £256bn, according to the AIC.