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Best practice: Disclose and explain

A CULTURE OF TRANSPARENCY What information do fund managers need to disclose to their clients about how their portfolios are managed? CFA's John Barrass reports on an issue troubling regulators.

This article appears courtesy of Global Investor.

You get what you pay for is one of those unhelpful adages that is usually only employed when what you pay for is a disappointment. It can also be manifestly untrue. The intricacies of modern commerce can shield any number of material facts on how business is conducted on your behalf: how do you know what you're paying for? Your chief interest may be in the outcome of the transaction rather than the processes that led to it, but do you really know how your money is being spent?

The first years of this century saw what was arguably a breakdown in trust between investors and their professional advisers. A succession of high-profile market scandals in the US led regulators to place a renewed focus on how and where investors' money was spent. Much of this effort went into assessing  what constituted acceptable management fees and investment costs.

In the UK, the Financial Services Authority tried to unravel commission structures and enhance disclosure standards for bundled brokerage costs and so-called soft commissions - those where no money changes hands, but services are provided instead.The

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