Transparency of Investments
With more than £46bn of assets, there is significant interest in how contributions are invested and in maximising the financial benefit for scheme members and employers.
The Board has focussed on transparency of investment fees and costs by adopting and promoting templates to report these, first developed by the Institutional Disclosure Working Group and now taken forward by the Cost Transparency Initiative (CTI). These represent a step forwards in having a common and comparable system of reporting investment costs.
The next step is enabling boards to compare costs, notwithstanding that there will always be local differences and minor variations. So, the SAB has supported the development of an online “portal” through which funds can require investment managers to report their fees and costs. This has been commissioned and was launched in March 2020. It provides basic data validation and average costs of investments for various asset classes. This is very much the start of developing a more granular system which will help shine a light on the totality of investment costs.
Pensions Funds have continued to promote the Transparency Code and have engaged with their asset managers to ensure the Code is adopted. Evidence is that the majority of fund managers are adopting the Code, while for others this is still work in progress.
For the 2019/2020 scheme year for Scotland, the status shown on the SAB Cost Transparency Compliance and Validation System was as follows:
Therefore, 97% of templates expected to be uploaded for this period were complete.
Funds are continuing to notice a modest improvement in the granularity of costs being disclosed, with cost templates covering up to 31 March 2020 being provided. However, there remains more work to be done working with private markets, in particular in providing cost transparency. Funds are adopting the CTI templates and expect to be reporting on this basis in the 2020/21 financial period.