Global investment company abrdn has today unveiled a suggested industry blueprint for solving the cost disclosure issues that have been plaguing investment companies, publishing a new ‘Statement of Operating Expenses’ (SOE) template.
abrdn welcomes and supports the FCA’s recent announcement that investment trusts are temporarily exempt from cost disclosure rules that have choked the industry due to the ‘double counting’ of costs.
However, it is important that investors are provided with relevant and accessible information on charges. While it is welcome that the FCA aims to consult on new rules with an intention to finalise them in the first half of 2025, investors need clarity and consistency among data providers and publishers in the meantime.
abrdn and industry campaigners have always been clear that the end objective should be more transparency, not less, which is why abrdn is suggesting the SOE as an interim measure.
On 30 September 2024 the FCA confirmed that forbearance measures have also been applied to the whole of the investment trust supply chain, including distributors and platforms.
Christian Pittard, Head of Investment Companies, abrdn, says:“The forbearance measures announced on 19 September were a huge leap forward for the investment company sector, but there’s a long way to go yet. A potential vacuum has been created by the immediate removal of the requirement to provide costs disclosures. There is yet to be agreement on what could and should replace the disclosures, and clarity could be months away.
“abrdn believes that the sector can and should improve cost disclosure for the benefit of investors. That’s why we are proposing a stand-alone cost disclosure template – a Statement of Operating Expenses (SOE), that Key Information Documents (KIDS) and factsheets could refer to.”
The Statement of Operating Expenses (SOE)
Following significant consultation with data providers and industry participants over recent months, abrdn has suggested a new template document for disclosing expenses incurred by investment trusts which should enhance investors’ understanding of the cost structure of the investment company concerned.
abrdn has designed a cost disclosure template called a Statement of Operating Expenses (SOE) – a standalone document to provide enhanced disclosure, ensuring that investors have full oversight over expenses. At the same time, it avoids the “double counting” of charges that took place under the current cost disclosure regime.
This SOE provides more relevant and transparent information drawn directly from the latest Annual Report of the company, with the added advantage that the underlying data will have been audited, although the SOE itself will not be an audited document.
Most of the information needed for the new SOE document is already available via data providers – meaning the solution could be implemented swiftly across the investment company sector.
Christian Pittard, Head of Investment Companies, abrdn, continues: “While the announcement on exempting investment trusts from cost disclosure rules was hugely positive, we now see a risk that either an information vacuum on costs develops or conflicting information will emerge – creating confusion and eroding confidence among investors.
“When we started developing this solution with other industry participants, we knew we wanted to provide more transparency, not less. This is exactly what the Statement of Operating Expenses does – in a user-friendly, digestible way. We urge the industry to adopt this as standard, delivering consistency for investors and a solution to cost disclosure for investment trusts once and for all.”
It is crucial that the sector finds a long-term solution to this issue. Investment trusts play a significant role in channelling capital into productive assets – all areas which are critical to the Government’s economic growth mission.
As of today, abrdn has published its first SOE, for Murray International Trust PLC, and will be rolling this out across the range within days.
The updated factsheet is here.
KID is here:
