Eve Maddock-Jones, Investment Week, 17 November 2023:
A private members’ bill tabled by former pensions minister Ros Altmann, which urged the government to remove investment companies from the Alternative Investment Fund Managers Directive (AIFMD) regulation, was selected in the ballot last week and will have its first reading on 22 November.
Following a debate on the issue at the House of Lords on Monday (13 November), Richard Stone, chief executive of the AIC, said the bill would hopefully “accelerate action on this crucial issue of investment company cost disclosure”.
Emma Bird, head of investment trusts research at Winterflood Securities, said the current cost disclosure rules appear to create an “unlevel playing field” for the investment trust industry.
The sector has been weighed down by some of the widest month-end discounts in 15 years, which Bird said was mainly due to macroeconomic factors. However, she noted these disclosure requirements are also likely to have weighed on sentiment towards investment trusts…
The AIC has long been in favour of reforms to investment trust costs, but for the first time, the group has put forward its own cost disclosure proposal, which entails that platforms, wealth managers and advisers disclose the ongoing charge to retail clients.
‘No merit in including gearing costs in any disclosure’
However, James Carthew, head of investment companies at QuotedData, pushed back on the AIC’s call to disclose gearing costs.
Carthew said that while he was “pleased” to see the AIC is “throwing its weight” behind the Altmann bill, the association’s proposal “just highlights how overly complex cost disclosure has become”.
“We see no merit in including gearing costs in any disclosure, for example,” he said. “Like fees on underlying investments, these just reflect an investment decision, the outcome of which is included in the net asset value 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.”
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