AIC chief defends bid to replace TERs
Critics of the move by the Association of Investment Companies to replace publishing total expense ratios with ongoing charges are “wide of the mark”, Ian Sayers has claimed.
The director general also denied claims that performance fees would be excluded from the new methodology, stating they would be included in a separate figure.
Mr Sayers said: “Trying to find a single methodology to cover the whole investment company sector was never going to be easy. It’s one of the attractions of investment companies that they are more diverse than open-ended funds and one of the reasons our long-term performance is so much better.
“When we set ourselves the task of coming up with these recommendations, we wanted something that could enable investors to compare investment companies to each other using a robust and consistent standard. But crucially we also wanted to allow comparisons between investment companies and open-ended funds.
“Indeed one of the most common requests from advisers in the lead-up to the retail distribution review has been for equivalent information from investment companies to make such comparisons possible.”
Phil Challinor, director of Birmingham-based Chatfield Private Client, said: “The change is a brilliant idea and well overdue. TERs are not what they say on the tin and it’s a scandal that turnover costs don’t have to be included.
“I can understand why Mr Sayers has been criticised as there are vested interests out there among people who don’t want investors to know about the hidden turnover costs, meaning investors could pay more than 3 per cent on active funds and get very little return.
“This is why we only recommend index-tracking funds.”