Lies, damned lies and IMA statistics


The Investment Management Association (IMA) should be renamed the Investor Misinformation Association given its relentless efforts to defend the indefensible.

It recently attacked the idea that there may be hidden costs when the plain truth is savers and investors have to:

  1. Wait up to 12 months to receive their individual fund/s annual report.
  2. Play hide and seek by turning countless pages in a multitude of documents to find all costs associated with their investments and savings.
  3. Add up the disclosed transaction cost figures (mainly stamp duty and commission).
  4. Divide the sum of these purchase and sales costs by the total £ sum of purchases and sales to give a percentage.
  5. Search on the internet to derive the likely spread of the shares bought and sold since these are not disclosed.  Add the percentages calculated from point 4 and 5 to derive the full dealing cost.
  6. Multiply this percentage by the average of the total purchases and sales, and then divide this number by the fund size disclosed on another page within the accounts.



On Saturday 4th February, appearing on Radio 4′s Money Box, even Mr. Richard Saunders of the IMA now admits how hard it is for investors to see costs, such as dealing costs:

“They are in the report and accounts which is a document which I completely agree that most investors would never see.  They probably don’t even know it exists.  I think there is a good case for making those much more, much more prominently available to investors.”

In yet another failed attempt to prove there are no hidden costs, the IMA recently produced statistics showing that because the average active fund had only under-performed their benchmark by 0.8% pa over the last 10 years, this was further overwhelming evidence of no hidden costs.

Picking a 10 year period was sneaky and misleading because few consistent badly under-performing funds normally survive 10 years without being culled.  They then tend to be either closed or merged with another more successful fund and hey presto their poor performance disappears from IMA statistics!

Not wishing to be unnecessarily cruel to the IMA we decided to test our assumption by  crunching through the 10 year numbers ourselves using Morningstar data, arriving at near identical underperformance over 10 years to the IMA.  However, unsurprisingly the underperformance figures double over five years.

10 Year Return % pa 5 Year Return % pa
Average IMA UK All Companies Active Fund



FTSE All Share Index






Source: SCM Private based on Morningstar data for periods ending 31st December 2011

Even one of the IMA’s largest members, Fidelity together with one of the largest financial advisers, BestInvest, have publicly declared that there needs to be more transparency on costs and in one understandable headline number; which should include dealing costs.

Not one but two recent polls have shown that 80% of the public simply do not know how much their investments are costing.

However, Mr Saunders in the same radio interview went on to claim that the new European regulator disclosed charging measure; the ‘ongoing charge’ did contain everything (except of course the cost of dealing).  Not being 100% sure of this, Gina Miller co-founder of SCM Private, who was facing Mr Saunders on Moneybox has since researched the ‘ongoing charge’ and guess what – MISLEADING INFORMATION AGAIN!

The European regulator (ESMA) actually defines this new term, the ‘ongoing charges’ as:

‘There is a presumption that all costs borne by the fund must be taken into account unless they are explicitly excluded, while performance-related fees and transaction costs are among the costs excluded from the calculation (as are entry and exit charges borne by the investor).’

Or in other words, it does not include ALL COSTS as it excludes performance fees, transaction costs, or entry or exit costs borne by the investor.

Are they misleading the public?

You judge – if you believe the IMA are not telling you the truth about how much it cost when you hand over your hard earned money to professional investment managers – register your support for 100% transparency of fees and holdings at .

Posted By: True and Fair, 11:00 am

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