Pensions - Articles - Pension schemes need to manage material transaction costs

 The research provides analysis of the transaction costs incurred by a selection of the world’s largest and most complex institutional investors, with combined assets of over £2 trillion. This is one of the most detailed global studies ever completed on this subject and provides an indication of the overall magnitude of these costs for the first time.

 John Simmonds, CEM Benchmarking’s UK Principal, commented: “Transaction costs make up a significant part of the investment costs incurred by institutional asset owners. Our study shows that, on average, transaction costs account for 24% of total investment costs.
  

 “Whilst transaction costs are clearly material, there is a range. Where you sit in that range is dependent on asset mix, volumes of trades, estimates of spreads or simply if you are paying more or less than others for similar activities. These criteria are all possible to monitor and manage as part of regular cost assessment, so institutional investors need to better understand these costs and the factors that drive them.”

 Simmonds continued: “There has been a real drive towards transparency in investment costs around the world. Obtaining the data is the first and hardest part. What comes next is a comparison with others on a sensible basis to determine if those costs are reasonable.”

 The full report can be found here