Fund managers will be forced to disclose all costs relating to their funds, and update clients on a regular basis, after Mifid II rules were passed into European law.
Article 24 of the Mifid II rules, which have now been finalised by European policymakers, states that “all costs and associated charges” relating to investments must be disclosed.
The article states that the disclosures should be “aggregated” in order to “allow the client to understand the overall cost as well as the cumulative effect on return of the investment, and where the client so requests, an itemised breakdown”.
Mifid II also states that charges should be updated and disclosed “at least annually”.
The ruling comes after two years of debate in the UK and Europe about fund cost transparency. SCM Private, run by former New Star chief investment officer Alan Miller and his wife Gina, has been campaigning for greater disclosure of fund management costs through the company’s True and Fair campaign.
The campaign was today claiming victory in their bid to force managers to disclose the total cost of investing in their products.
Mrs Miller said: “This is a fantastic result for UK and European investors. While the UK’s trade bodies remain determined to produce empty rhetoric and ineffective voluntary codes, the EU has taken the lead and brought in regulation set to end the shameful anti-consumer practices that have prevailed for decades in UK financial services.”
The IMA introduced a “voluntary code” for its members last year which has been adopted by the majority of fund managers. It includes an estimated percentage figure for the impact of portfolio transaction costs and a similar estimate for the impact of the bid-offer spread on fund units.
