Value for money is hard to find when it comes to the fees paid by investors to fund managers.
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A recent pilot study by the Financial Markets Authority (FMA), to test how well a cross section of 14 fund managers would perform using the regulator's value for money guidance, turned up some poor results.
The study's self-assessment tool revealed inconsistencies in performance measurements, while the cost of fees reduced benefits to investors.
"The benefits of their skill to investors in some funds is reduced by fees, and the costs of commission paid by managers to third parties," the report says.
"Value for money is also undermined by some fund managers not using an appropriate market index as a reference point for the performance of their funds and to benchmark performance fees."
FMA director of investment management Paul Gregory said performance measurements were critical to determining whether an investor was getting good value for money.
"If a fund manager is not using an appropriate market index, how do they or their investors know what their strategy is, or if it provides value for the risk investors are taking and the cost they are paying," he said.
The FMA created the value for money guidance and self assessment tool in association with the industry, in order to create consistency in the reporting and to ensure fund managers were providing the advice they were charging for, and that their performance fees were justified.
Fund managers and their supervisors will need to file an annual value for money report to the FMA, with the first to be delivered by the middle of next year.
In the meantime, the FMA was pursuing specific matters with individual managers and their supervisors to address any shortcomings revealed by the pilot study and was looking for some immediate improvements.
The FMA said it had other regulatory tools available if it found persistent conduct issues arising.