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Thoughts on the FCA's fund fee transparency proposals

11 January 2018

Alternative investment funds may soon be required to report total cost of ownership in a standardised form. Work on new templates is ongoing, and fund managers need to be aware of the situation and to be involved in this important debate that has so far been largely overlooked.

The FCA's Final Report from its Asset Management Market Study sets out proposals regarding transparency of fees and charges. One such proposal is a standardised cost and fee disclosure, which is expected to be applied to alternative investment strategies (including hedge and private equity funds). Templates are expected by 31 July 2018 at the latest. In the meantime, there are some areas worth considering by asset managers to help frame thinking as and when the new regimen is unveiled by the FCA:

  • Performance fees – How would these be accommodated in to any template? Is it even correct to do so?
  • Other variable costs – How will these be calculated/estimated in any template? What will be the agreed/standard assumptions? And, conversely, how would any stock-lending profits be treated?
  • Funds with less than 12 months' track record – Will there be no disclosure for such funds? Or estimated disclosure?
  • Non-UK funds – Will these enjoy a competitive (dis)advantage if disclosure rules differ across jurisdictions?

To find out more, download our full insight into the FCA's proposals.