Transparency
| Date: | January 2010 |
| Author: | Peter Ellis |
Transparency is a word that seems to be on everybody’s mind. It seems that someone, somewhere is always calling for “greater transparency” to be provided. We have had the scandal of MPs’ expenses, concerns about bank charges, and reservations expressed by investment managers about board room pay. These are just some examples of where the word transparency has been widely used recently. It is not surprising then that we have started to use the word widely within the investment management industry.
This research looks at the subject of investment management transparency in an objective and dispassionate way, and transforms a huge and nebulous subject into one that is well defined and manageable.
Our research has established a best practice for transparency. Best practice for transparency is not only something that investment management firms need to adopt; it will also deliver tangible benefits in four main areas: sales, client relationships, outsourcing, and systems. It will also help investment management firms and TPAs to avoid issues arising with outsourcing arrangements.
Table of contents
| Management Summary | 1 |
|
1 |
Introduction | 3 |
1.1 |
Objectives and scope of the research | 4 |
1.2 |
Definition of terms | 5 |
1.3 |
Methodology | 6 |
2 |
The Transparency Landscape | 9 |
2.1 |
What is transparency? | 10 |
2.2 |
Transparency in investment management | 11 |
2.3 |
A transparency timeline | 13 |
2.4 |
Three conclusions about the nature of transparency | 17 |
3 |
The Eight Areas of Transparency | 19 |
3.1 |
Trust, risk and transparency | 20 |
3.2 |
Where transparency needs to be delivered | 22 |
3.3 |
The cost of transparency | 23 |
3.4 |
The lack of transparency | 24 |
3.5 |
Why there is a lack of transparency | 26 |
4 |
Issues and Industry Initiatives | 27 |
4.1 |
Disclosure of fund costs | 28 |
4.2 |
Clarity of understanding | 31 |
4.3 |
Undertakings for Collective Investments in Transferable Securities (UCITS) IV | 34 |
4.4 |
Hedge fund transparency | 35 |
4.5 |
Responsible investment and governance | 39 |
4.6 |
The dangers of transparency | 42 |
4.7 |
The two dimensions of transparency | 43 |
5 |
The Client Perspective | 45 |
5.1 |
What is transparency and what is driving it? | 46 |
5.2 |
Have you asked your providers to be more transparent? | 47 |
5.3 |
Where is the impact greatest? | 49 |
5.4 |
What are the advantages and disadvantages of transparency? | 50 |
5.5 |
Have other industry participants become more transparent? | 51 |
5.6 |
Future trends | 52 |
6 |
Delivering Transparency: Current Practice | 53 |
6.1 |
The meaning of transparency | 54 |
6.2 |
Where it is important to be transparent | 55 |
6.3 |
The main drivers for transparency | 58 |
6.4 |
Delivering transparency | 60 |
6.5 |
Transparency and Outsourcing | 61 |
6.6 |
A US perspective on transparency | 62 |
7 |
A Best Practice for Transparency | 65 |
7.1 |
Why a best practice for transparency is needed | 66 |
7.2 |
Components of a transparency best practice | 67 |
7.3 |
Benefits | 72 |
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