Managed fund costs to halve: Rice Warner
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Wouter Klijn is a journalist with InvestorDaily, a Morningstar publication.
The Australian Securities Exchange's (ASX) new managed fund service, which enables the purchase of units through the exchange's Aqua II technology, could cut underlying transaction costs by more than half, according to Rice Warner.
In a report commissioned by the ASX, Rice Warner consultant Jonathan Ng estimated the managed fund service would cost around $18 for broker and platform transactions, compared to around $43 per transaction currently, a decrease of 58 per cent.
But Ng said different underlying costs and, therefore, different levels of saving applied depending on the intermediary used.
"The savings ranged between 35 per cent and 60 per cent for different transaction types," he said.
The financial services industry's underlying costs for managed fund transactions was roughly between $290 million and $430 million in 2011, he said.
"If the entire market utilised the ASX managed fund service, we estimate that the industry-wide transaction processing costs could potentially have halved to between $145 million and $215 million," he said.
But he said that level of cost savings would be unlikely.
"We acknowledge that our estimates are an overstatement of the actual industry-wide savings as it is unlikely that 100 per cent of managed fund transactions would utilise the ASX managed fund service," he said.
He also said the research gave a better insight to the underlying cost level, which created opportunities for improvement.
"Another aspect of the research showed the need for greater understanding of the complete end-to-end cost of the applications and redemptions process as it exists today," he said.
The ASX is working with 60 fund managers, unit registries and ASX brokers to develop a range of educational programs to help advisers and investors understand how the service will work.
The service is still subject to regulatory clearance.