What is the Cost Transparency Initiative?
The CTI was launched to take forward and update the framework proposed to the FCA by the Institutional Disclosure Working Group (IDWG). It will ensure the effective rollout of the new cost transparency templates and make sure that they are relevant both now and in the future.
What costs are covered by the templates?
Within asset types, costs under consideration will be those, both direct and indirect, that draw down directly on the value of the funds of the asset owners. Broadly ‘direct’ costs include invoiced and invoiceable costs, whilst ‘indirect’ include implicit costs that are reflected in a reduced net performance figure. Costs that are borne by the P&L of a supplier are out of scope.
By way of an example; where an asset owner is charged for research through a research payment account, this would typically be in-scope. However, where research costs are absorbed by the asset manager and are not passed on, these will be out of scope.
Do the templates include the alternatives space?
The IDWG has considered alternative asset classes including private equity, physical assets, cash, foreign exchange and derivatives. For example, the IDWG proposed separate private equity and physical assets templates.
When will the members/participants of the CTI be announced?
We anticipate providing further information on the members of an participants in the CTI imminently.
How does the CTI differ from previous and existing work in this space?
The IDWG – on which the CTI tools are based – had a strong commitment to consider the existing work and this was written into their Terms of Reference.
Sub-working groups of the IDWG built on standards already proposed by organisations representing fund managers and product types, and this included proposing amendments or adding new content or fulfil the stated aims of the IDWG. For example, the templates already proposed for use by the Local Government Pension Scheme Advisory Board are a form of aggregated fund- or product-level account template, and is already comprised of information based on underlying asset classes.
The CTI is broader in scope than earlier work by the IA, LGPS, ILPA etc. which focused on only some asset classes. The CTI approach to the fund/product level template has been expanded to cover the full market, including alternatives.
How and when will the tools be updated in the future?
The tools will be updated in the future on a periodic basis, or as and when needed. It is not expected that the periodicity of updates will be frequent as otherwise this could be burdensome for users of the template.