Andrew Pitts, editor of Money Observer magazine, responds to the Telegraph feature on fund charges:
“Money Observer set out these issues earlier in the year. We are glad that a national newspaper is now highlighting the rough deal for investors and bringing the high-charging culture of the UK fund management industry to a wider audience.

“Money Observer will continue to keep the pressure on the financial services industry – and the managers of open-ended funds in particular – by highlighting where high charges are not justified.

“We have launched a 10 point action plan to make it fairer and more transparent for investors. And we urge the industry to adopt this plan to help savers and investors understand the true cost of investing. We will publish further research into fund management charges in September.”

Andrew Pitts is available for comment on this issue to explain the charges investors face and how the industry can improve its levels of transparency. Details of the previous Money Observer campaign can be found at www.moneyobserver.com

Money Observer’s 10-point manifesto for investment cost transparency*
1 All potential investment charges should be listed on a single sheet supplied to new investors.
2 Investors should be informed of typical buying costs for investment trusts, exchange traded funds, Oeics and unit trusts in all literature relating to the funds.
3 All types of funds should publish basic total expense ratios (TERs) prominently in their literature.
4 The previous year’s portfolio turnover rate should be published with the estimated cost of dealing and stamp duty, where applicable, expressed as a percentage charge.
5 Where performance fees are levied, regular annual management charges should be set at a minimum of 0.5 percentage points below the market average. Maximum fee limits should be introduced.
6 Performance fees should be shown separately and as part of an overall TER.
7 Performance fee structures should be made consistent or standard growth illustrations given so fee outcomes can be compared.
8 Improved benchmarks should be developed with performance fees based on a minimum of three years’ outperformance, and fee clawbacks should be introduced.
9 High water marks should be compulsory so managers can only charge another performance fee when their returns exceed a previous high point.
10 Potential dilution levies should be made clear for Oeic investors, and typical selling costs for investment trusts, exchange traded funds, Oeics and unit trusts should be prominently displayed in fund literature.

* Source: Money Observer February 2010