Multi asset | Feature


cheapest in the sector – nor are they the most willing to open up their special sauce recipe to scrutiny.


ASSESSING THE LABYRINTH It is this tangle of third party, new and exist- ing underlying asset pools that has con- spired to confuse even the fund managers themselves, according to Sier. Keeping track of management, transaction, administration, currency and other ancil- lary fees is a challenge in itself, without even trying to explain it to the end investor.


A range of implicit, explicit, direct and indirect fees – some of which must be reported by regulatory demand, others not – serve to confuse even the most on-point fund manager. “If the multi-manager is run- ning the underlying fund them- selves, they should easily be able to get the data because it is part of the same organisa- tion,” Sier says.


seeking information on at least 300 funds, just for them. Some managers are more obliging than others to provide information.


SHINE A LIGHT


The less helpful ones should ring alarm bells, Sier says. “If you have a manager who says they are unable or unwilling to ask their underlying funds for data, you should think long and


that plenty of fund managers, if initially reluctant, have decided to embrace the opportunity to use the template he has created.


“They can finally code their systems to one standard,” Sier says. Instead of having to link into reporting software run by various consulting firms and custodians, fund managers can produce one method to report their underlying fees.


Investment management


is not, as the FCA considers, a commodity. Robin Ellison, trustee


“The problem comes when you are going to a party that is not within your group; or the third party has a different reporting period to you; or if the third party is offshore and is not obliged to give data.” Funds-of-funds that are domiciled or have underlying funds in relatively secretive locations throw a further spanner into the works of those trying to push for transparency.


In its recommendation to the FCA, the working group on fees said investors should be able to ask for and – importantly – receive this data, no matter where it might be hiding and Sier, within his new company Clearglass, has created the tech- nology to do so. “Pension funds ask us ‘how many layers can you go down?’” Sier says. “We can ask for as many layers as they want as it is their data.” He has lined up several large institutional clients – including some of the UK’s largest pension funds – and is in the process of digging into the underlying data on their multi-asset funds. Due to the size of the mandates run by one of these clients, he is


hard about whether or not you want to car- ry on working with them,” he adds. “If they cannot do it, it means they are operationally incompetent – the very essence of what a manager is, is being good at data.” By the same token, if they, as the client of the purchased underlying funds, cannot get the data they need, why are they buying into these funds in the first place? “How do you know they are making deci- sions based upon data and not just a recom- mendation?” Sier says. “You want somebody who is making good, smart decisions based upon empirical evi- dence. If they cannot get that data when asked, it calls into question their whole process.” Yadav says that one of the most meaningful ways a multi-asset manager can add value to the end investor is by making wider asset allocation decisions. This could, and some argue should, be clearly split out from other fees as it has a direct impact on its performance. If they are not able to access the full span of data, it is questionable whether this value could be added by anything other than chance.


The encouraging follow-up to Sier’s story is


A shove from the regulator may have helped, too. But despite signing up some large pension investor clients, Sier found hesitancy from some funds. He says that initially some investors had been concerned that they would find something “scary” and that their consult- ants may demand more fees to access the necessary data.


Instead, Sier’s Clearglass charges a flat, relatively low fee, per search. “Frankly, it is also boring,” Sier says. “Choosing the asset allocation and the managers is interesting but delving through the costs is not.” For Robin Ellison, lawyer, trustee of sever- al schemes and former


chair of the


National Association of Pension Funds, echoed the views of many investors who are finding themselves with hours of extra work (and cost) thanks to additional regulation.


Ellison says he suspected there would never be perfect transparency in fees, but it was the job of consultants to keep a “gentle eye” on them.


“Knowledge of fees is sensible and may allow


room for negotiation and


transparency is also good. But outcomes are the key,” Ellison says. “Being careful with fees is sensible and good govern- ance, but cheapest is not always best. Investment management is not, as the FCA considers, a commodity.” Ellison continues to explain that the FCA’s current “mild obsession” with fees may be because it is something that can be meas- ured unlike long-term performance, which is harder, and few have yet tackled.


Issue 82 | March 2019 | portfolio institutional | 37


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