The Association of Investment Companies has issued a press release this morning in which it welcomes Baroness Ros Altmann’s intervention in the debate about the disclosure of investment company costs with the aim of removing investment companies from the scope of the Alternative Investment Fund Managers Directive (AIFMD).
This is great news, we think.
In an accompanying update note, the AIC sets out its views on cost disclosure. You can read this here.
We are less enthusiastic about the update note. It is important that relevant costs are disclosed to investors in annual reports, factsheets and the like, but their proposal includes some charges that we do not think are relevant.
For example, we see no merit in including gearing costs in any disclosure. Like fees on underlying investments, these just reflect an investment decision, the outcome of which is included in the NAV return. No fund should be penalised with an inflated cost figure for judicious use of gearing – which is after all one of the strengths of the investment company structure.
Neither do we support the disclosure of portfolio transaction costs. These are entirely backward looking and an unavoidable cost of investing. There is no benefit to the manager from over trading and no benefit to the fund if the manager avoids trades that it would otherwise carry out just to massage a cost figure lower.