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Kevin Gundle

DC charge cap creates a ‘race to be the most mediocre’ says Aurum

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The new DC Charge cap on default funds may eventually drive trustees to source products based on cost rather than the value that a well-sourced selection of investment solutions should deliver for their members.

That’s the concern of Aurum, a specialist alternative investment manager focused on hedge fund solutions.

Kevin Gundle (pictured), CEO of Aurum Funds Limited, says: "The charge cap restricts the ability of investment managers to provide innovative solutions that provide greater value to pension fund members. This industry could be in real danger of being left with a series of conventional, undifferentiated, low-cost products in a race to become the most mediocre.

"Trustees have a responsibility to secure the best investment solutions offering the best value for members, not simply the lowest cost. There are many alternative solutions available that would demand fees above the charge cap, but offer far greater value."

Gundle says: "Whilst these options may not always be suitable for a scheme’s risk profile, they should not be discounted purely on a cost basis. While it is a trustees responsibility to ensure that unnecessary fees are eradicated across all advisory areas, schemes should ensure they are placing an emphasis on value not just cost or they could be missing an opportunity to achieve superior outcomes for members."

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