INVESTMENT COSTS
MAGDA WIERZYCKA: Full disclosure means there is nowhere to hide for asset managers
All service providers to retirement funds have to comply with the same transparency requirements that have been in place for unit trusts since 2016
I always enjoy reading Warren Buffett’s annual letter to shareholders as it is full of interesting insights, coming from someone who has the luxury of being able to be completely honest. Once again Buffett used his latest letter to trumpet about the effect of fees on the ultimate investment outcome. This time he used the following analogy: if a pension fund had invested $1m in a no-fee S&P 500 index fund at the start of his career in 1942, that investment would have grown to about $5.3bn. If the same pension fund had paid only 1% per annum in fees, its gain would have been cut in half, to $2.65bn. “That’s what happens over 77 years when the 11.8% annual return actually achieved by the S&P 500 is recalculated at a 10.8% rate.” His letter comes at an interesting time for the SA retirement fund industry. As from March 1 2019 all service providers to retirement funds, including administrators, advisers and asset managers, have to comply with the full fee disclosure requirements of the A...
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