Q. Is the intention for the CTI approach to be adopted by the industry as a whole?
A. Yes. The CTI provides an industry standard for transaction cost reporting. Full coverage of the voluntary standard will however depend on strong engagement by investors, asset managers and intermediaries.
Many asset managers who manage public funds are already signatories to the LGPS Transparency Code and have therefore transferred to the CTI templates by 2020.
Q. What are the CTI’s expectations on timing of take-up?
A. We expect trustees and advisors to regularly engage with their managers about obtaining information.
In the year following launch of the standards we expect managers to be able to report against the published templates by no later than their scheme’s reporting year end after initial launch (i.e. from either December 2019 or April 2020). We expect future reporting years to follow, as a minimum, a similar reporting cycle.
We will continuously review take-up, by investors, intermediaries and managers, following the end of the April 2020 reporting period. If it’s below what we expect, we’ll talk to the FCA and TPR (and other market participants) about how we can increase it.
Scope of the CTI
Q. What costs are covered by the CTI templates?
A. The CTI framework provides a suite of open-access templates which provide a standardised way for asset managers to report costs and charges to investors (asset owners).
The templates cover costs which draw down directly on the value of the funds of the asset owners. This includes direct costs (costs which can be invoiced) and indirect costs (implicit costs that are reflected in a reduced net performance figure). Costs that are borne by the manager or service provider are not included in the templates.
Further details of definitions of the fields of costs are in the templates and guidance.
Q. Will the CTI hold any cost and charges data?
A. The CTI does not gather or hold cost data. The cost and charges information gathered through the templates is reported directly to investors (or via third party information services or consultants).
Q. Does this framework extend to retail consumers and should charges information be passed on to savers?
A. The CTI framework is aimed at institutional investors and the information is not likely to be of direct interest to retail consumers. It may be appropriate, however, to include summaries of some of the information in member communications or publications such as a Chair's statement.
Q. Does the framework cover DC?
A. The CTI framework is intended to be compatible with any regulatory or governance structure for all institutional investors, as it focuses on the costs and charges of investment and not on the structure of the management/governance.
Q. What is the jurisdictional scope of CTI?
A. The CTI scope covers all UK institutional investors. It does not, for example, rely on UK domicile.
Q. Which template should I use for a segregated mandate or a pooled fund?
A. The account template can be used for either pooled or segregated mandate types, for any vehicle.
Disclosing information using CTI and completing CTI template requests
Q. Who completes the main Account Template?
A. Asset managers or relevant service providers.
Q. Which template is for which asset class?
A. The Account Template covers listed asset classes, including pooled property. The Private Markets template covers closed-ended private equity and real estate funds, typically limited partnership structures with a fixed, finite life.
Further templates covering other asset classes are in development.
Q. Should costs be rounded?
A. No. Actual figures/costs should be used rather than rounded amounts.
Q. How frequently should the templates be created?
A. Unless you have specifically agreed otherwise, expect to receive the templates once a year. You or your manager may wish to agree to a more regular reporting schedule, though please bear in mind that the CTI is designed for annualised reporting.
Q. Over what reporting period should the templates be completed?
A. Figures should be annualised – unless specifically noted otherwise, or unless your client has requested a different reporting period. The reporting period should be marked clearly in the relevant fields. If the client has been invested for less than one year discuss your approach directly with your client.
Q. Do the disclosed figures need to be audited?
Clients may expect the completed templates before the accounts have been audited. In this case firms could put a note in the comment box explaining that information provided is provisional. Figures should be adjusted and resent to clients if the auditors subsequently request a significant adjustment to the financial accounts.
Q. Can the templates be modified for different investors?
A. Additional notes and/or detail may be helpful to aid recipients’ understanding of the information contained in the template, or to add further information where specific agreements are in place with certain investors. We do not recommend that the template is changed, as this would then require additional notes to explain these changes. For example, certain cells have been protected/locked to ensure formulae are not overridden or accidentally altered.
Q. How long do I have to complete the template for my client, following receipt?
A. Timelines should be agreed between the client and provider in advance. If your firm is adapting systems to complete the templates you should notify your client as soon as possible and seek to provide relevant information on a best endeavours basis.
Q. What implicit transaction cost calculation methodology should I use?
A. Your asset manager or service provider may choose to include a reference to the calculation methodology they have used to, for example, disclose their transaction costs. These could include:
- Regulatory methodologies (for example, PRIIPS slippage)
- Industry standard methodologies (for example, GIPS performance data)
Your manager will be ready to provide further information if you have any detailed questions on methodology.
CTI does not define Implicit Transaction Cost methodology. Your approach should reflect your firms’ wider approach to MiFID.
Q. How do I complete the template if I have a single annual charge?
A. If your fees structure is a single annual charge then you will not need to break down this fee into its component parts (i.e. you should not retrospectively ‘allocate’ costs to different fields artificially). However, if certain fields listed in the template are not components of your annual charge and may still be charged to the client these fields should be completed. It is best practice to make clear to your client which fields are included in the single annual charge to aid their understanding.
Q. When should I complete those templates released in 2020?
Investors can begin to work with managers to deliver information included in the 2020 release templates and extensions (LDI, fiduciary management and real estate). Investors should understand that managers may need to complete development work in order to deliver completed templates.
Managers should be ready to deliver these templates for the 2020/21 reporting year at the latest.
Interpreting information provided in the CTI format
Q. What skills and knowledge do investors need to use the CTI framework?
A. The CTI framework is designed to sit alongside existing regulatory requirements and, therefore, investors should be well equipped to use this information to help discharge their duties. An important part of what investors do is consider the value for money of the asset management services they make use of. Having access to readily available and standardised costs and charges information will help them assess this. The CTI provides guidance on the tools they create and there is already guidance and advice available in the market for investors.
Q. What should I do with the information I receive from my manager?
A. The Investor's 'How To' Guide sets out several steps to make best use of the information, including in relation to wider value for money assessment. You can also discuss with your adviser how best to make use of information.
Q. Can I share/publish the cost information I receive from my manager?
A. You must discuss with your manager what, if any, information it may be appropriate to share or publish.
Q. How long will it take my asset manager to complete the template once requested?
A. Discuss the timelines with your service providers to understand what a reasonable expectation is in your circumstances. This will highly depend on the processes, procedures and technology that your asset manager has. Some managers may be able to provide the information very quickly after you have requested it. Other asset managers may want to undertake additional data checking, be dependent on third party data providers or any number of other complexities.
Q. What will the information look like when I receive it from my manager?
A. You should discuss format in advance with your manager, and your adviser or third-party information provider if you have one. An illustration of how the information could be provided is available in the User Summary, which can be downloaded from the CTI website.
Q. Who completes the User Summary?
A. Generally, you or your adviser can use the information provided in the other templates to create User Summaries.
Q. Why can I not see everyone else's costs? Where is the central database?
A. The CTI does not currently collect or retain cost or charges data itself - it is intended only to facilitate information requests and the collection of data from asset managers according to an industry standard. However, you may wish to speak to third party information providers who may offer data presented at aggregate level and/or benchmarking against other service providers.
Q. What is a machine-readable template?
A. This is a format that a computer can understand and use to automate data reporting.
Q. If my manager/service provider uses the machine-readable format, what will I receive from them?
A. The machine-readable format of the main Account Template is available to make it easier for firms to provide data in a way which is compatible with their systems and to allow computers to easily extract and process the information. Your asset manager should be able to provide this data to your adviser or information provider in a way which can be easily translated into a readily understandable (e.g. visual) format. Alternatively, you or your asset manager may be able to map this information directly into a format similar to the User Summary (available on the CTI website).
Q. Not all fields are completed - is this correct?
A. In some cases, only a few fields (for example, in the Account Template rows 25-40) will need to be completed. Incomplete fields do not necessarily indicate an error. First, consider whether your provider charges a single annual charge. If this is the case, the headline figure disclosed (for example, in Ongoing Charges, will include all the relevant cost information). Secondly, consider whether any of the charges will not apply to your investment due to, for example, asset class, structure or the business model of your asset manager. Finally, the top level charges may have been completed leaving additional, optional fields blank. If in doubt speak to your asset manager.
Q. Where is the guidance for the old (2019) templates?
A. The changes to the private markets template (previously the private equity template) were an evolution. Additional fields are those relating to property funds. Otherwise, existing guidance for private equity funds has remained largely unchanged. Please, therefore, refer to the current guidance.
Q. How does it interact with LGPS Code of Transparency?
A. Existing Code signatories will be encouraged to make use of the new templates as soon as possible but will have a transition period of up to 12 months (which expired in 2020) to ensure they can adapt systems without interrupting the current flows of data. New signatories, including those real estate and private markets managers who can take advantage of the new templates will be expected to use them immediately.
Q. What is the system for the LGPS funds and pools (Byhiras)?
A. The system, procured by the Local Government Pension Scheme Advisory Board, developed by Byhiras and launched on 1 April 2020, provides data validation and aggregates data about fees in line with the CTI framework. The system enables the reporting and comparison of investment costs and also provides information about whether a template submission is on time or late.
LGPS funds across the UK can benefit to the system either directly or through a sharing arrangement with the relevant Scheme Advisory Board. There will be no further cost to the LGPS funds across the UK for use of this system over the amount they already pay to their respective scheme advisory boards.
Further information can be found on the FAQs section entitled ‘System’.
Q. What is the system for managers with LGPS clients (Byhiras)?
A. Managers who have signed up to the LGPS Code of Transparency should already have processes in place to submit the template data in line with other reporting practices. The manager has a default of 90 days after the relevant period end to submit completed templates, though if there is an existing shorter time period agreed then you should continue to comply with this.
For Code related queries managers should contact the SAB secretariat, for template queries either the SAB Secretariat or the CTI and for system related queries they should contact Byhiras.
Q. Who can use the LGPS system/Byhiras system?
The system was designed for the LGPS Advisory Board and provides each fund and pool to access to information about costs.
CTI history and next steps
Q. How does the CTI relate to the IDWG and the draft templates it published?
A. The FCA released the IDWG’s final report in November 2018, which included draft reporting templates. This set the conceptual framework for what information investors need and what information asset managers should provide.
The CTI has had the responsibility since then to operationalise this. It has overseen a significant process of testing and development, including a pilot which was concluded in March 2019. Further details of the background to CTI are available on the website.
Q. What will the CTI Board do next?
A. The CTI Board will keep the templates and the reporting process under a process of review and continual improvement. This will include extending the framework to cover new areas.
It is also the Board’s responsibility to promote the CTI amongst the pensions industry and to monitor take-up.
Q. What is the CTI’s approach to the COVID-19 pandemic?
A. The CTI Board discussed COVID-19 in their meeting on the 25th March 2020. At a high level the Board agreed to continue to continue to operate in line with their agreed 2020/21 plan, with some caution and with more regular review points given the emerging circumstances. Generally the Board are positive that, though there may be some operational issues that may limit the scope and speed of both engaging with and adopting new standards, existing CTI templates are considered to be embedding well and are not anticipated to be materially impacted by COVID-19.
Investors and providers should discuss pragmatic approaches to dealing with challenges to delivering in line with the CTI templates as they arise.
The CTI Board welcomes further feedback on COVID-19-related issues.
Q. How do I provide feedback on the templates, or get involved in their development?
A. Please contact [email protected] in the first instance.