Value for money
The fees charged to charities by their investment managers are in the spotlight. However, there is no common approach or methodology for reporting or looking at them. Fees are often bundled or estimated, leading to a difference between those stated and those actually paid. In an era of low interest rates and low global growth, precious basis points of positive returns can be eroded through fees. The introduction of European financial regulation, MiFID II, requires companies providing investment management services to be more transparent than ever about the fees they charge. But even then, Trustees will need to ensure they are getting the best value for money out of their investment managers.
Kate Rogers, Head of Policy, and Giles Neville, Head of Charities at Cazenove Capital, have run a series of working groups with a collection of charity representatives from all backgrounds addressing this topic. Amy Browne, Portfolio Manager at Cazenove Charities, summarises their findings and sets out some practical insights to guide your way through the process of assessing value for money.
The report covers the following:
What are you paying your investment managers to do?
What are you trying to achieve with your charity’s assets?
How much would you be prepared to pay for a target return of inflation +4%?
If better off net of fees, does the outright fee level matter?
What are the measurable and unmeasurable outcomes you expect to see?
Is it worth paying for active investment management?
The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored.