Fund Cost Review

In today's markets investment management companies that manage collective investment schemes have various pressures to contend with including:

• Falling or low asset under management levels resulting in lower income levels
• Squeeze on costs to maintain profitability
• Increasing governance requirements

Winchester White's Fund Cost Review can help investment management companies to relieve these pressures by:

• Exposing "hidden" costs that should rest with the shareholders or unitholders under the terms of the prospectus
• Exposing the costs of outsourced activities that have crept back into the retained business over time so that the management company pays twice over.
• Updating the management team's view on common and acceptable market practice in charging the cost of activities to the fund which has moved significantly over the past few years

The overall objective of the Fund Cost Review is to ensure that an investment management company is not over subsidising the fund in providing functions and services that are of direct benefit to the fund free of charge.
Costs beyond outsourced services are often absorbed by the company with little thought as to whether it is fair and reasonable to charge these to the funds. The Fund Cost Review ensures that the cost base of the organisation and funds is well understood and that costs are properly applied across the fund range so that clients are not disadvantaged.
The benefits of the Review will vary from company to company, however Winchester White's experience has shown that the operational cost savings can be considerable, whilst the effect on performance across all funds can be minimal. For instance for one company with an AUM of £5 billion the new charging approach cost the funds 2-3 basis points on the TER, but added £1.7million to the management company's bottom line.