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The Cost Transparency Initiative (CTI) – created by pension funds and asset managers to develop the templates – launched its reporting models last week after nearly two years of work.
Versions of the templates have already helped UK local authority pension funds identify millions of pounds of previously unreported costs, and it is hoped they will be rolled out across the country’s £2.1trn (€2.4trn) pension fund sector.
However, Marina Cremonese, senior analyst at Moody’s, warned in a report this week that the initiative was “credit negative” for asset managers “because it will likely make their cost and fee structures more transparent and easier to compare, encouraging institutional investors to negotiate rebates”.
“Although adoption of the new cost templates is voluntary, we expect pressure from institutional investors to drive widespread adoption among asset managers, and those that resist the CTI initiative run the risk of losing business from their institutional clients,” Cremonese said.
She also warned that the Financial Conduct Authority could make the code compulsory if the voluntary regime was shown to be ineffective.
“The fees asset managers charge their institutional clients are already under competitive pressure, and are much lower than those paid by retail clients,” Cremonese said. “The introduction of standardised cost and fee disclosure will weigh further on asset managers’ margins, including those for more insulated, less liquid asset classes such as private equity.”