For Immediate Release: 24 February 2000

FSA Occasional Paper – The price of retail investing in the UK

This paper from FSA sets out an academic’s view on how to measure costs in the UK retail fund industry, and prompts debate over whether the current focus on the annual management fee charged by managers and the TER (or Total Expense Ratio, now becoming more common as a measure of the cost of different products) are the best way for customers to appreciate the total cost incurred in a collective investment vehicle.

However, Alan Ainsworth, Chairman of AUTIF, noted:

“As an industry, we are all in favour of disclosure and openness to our investors.  However, because MP1 is an amalgam of historical costs and relative past performance, it is dangerously misleading – even for sophisticated investors and their advisers.”

Donald Brydon, Chairman of the Fund Managers Association added:

“If this paper helps emphasise the cost to investors of stamp duty on UK equity transactions, and the work that the fund industry has been – and is still doing – to reduce broker’s commissions and other transaction costs, then we welcome it.  However, if the FSA wants to give customers more information on these costs, there are many better ways than MP1 which is a deeply flawed measure.”

The fund management industry will be happy to continue the debate over the best way to give cost information to investors, and to play a full part in discussing the relative costs of managed funds over different periods and different markets.

- ENDS -

For further information please contact:

Keith Niven, Schroders, 020 7658 6337

Julian Le Fanu, FMA, 020 7588 0588

Christopher Sandford, West AM, 020 7444 6675

Philip Warland, AUTIF, 020 7831 0898

Anne McMeehan, AUTIF, 020 7831 0898

Clare Arber,  AUTIF, 020 7831 0898

Notes to Editors

1.   This report is the final version of an academic paper which has been in preparation for over a year.  Detailed analysis of the paper have been carried out by a group consisting of

Attachment - Survey (in PDF Format)