IMA rejects claims pension fund managers ‘hide’ trading costs

The Investment Management Association (IMA) has denied pension fund managers are excessively trading assets and hiding the cost this presents to consumers.

Wealth management firm SCM Private claimed on Monday that assets are held for just nine months on average in pension funds before being traded for little gain to the consumer.

The cost associated with this trading is £3.1bn across the industry, SCM said, and is not disclosed in either the annual management charge (AMC) or administration charges shown to investors.

However, the IMA has refuted SCM's research, claiming it is based on "unreliable" data and disproved by other studies.

"Drawing conclusions from raw turnover data is notoriously unreliable, since turnover arises for many reasons, not least investor decisions to move into or out of funds," said a spokesperson for the IMA.

The spokesperson said research published by the IMA showed the difference between the performance of index tracker funds and the index was broadly in line with fund charges, with no sign of ‘hidden charges' reducing performance.

"Similarly when the IMA examined the performance of active UK equity funds, the combined effect of stock-picking and associated trading costs had no significant drag on performance," they said.