Pathfinder blazes way with fee cap

Brownsey said the 1.3% fee (GST included) would pay for all fund expenses, excluding transaction costs covered by a 0.75% buy/sell spread, such as investment management, audit and trustee fees. He said as the fund grows the actual expense ratio should come down closer to 1%.

"I can't think of too many other funds that have put a hard cap on their MER [management expense ratio]," Brownsey said. "It's not in the interests of many fund managers to be more rigorous around fee disclosure. But if there's more disclosure managers will be less able to charge costs back to the fund - it's the investors who are paying those costs."

Brownsey and Berry said the current fee disclosure regime was inadequate with some Australian unit trusts sold in New Zealand, for example, not revealing embedded fees.

"A manager should not be able to say there are no management fees, and yet be paid under another guise without any disclosure," Brownsey said in the statement. "Investors should be able to see all fees paid to the fund manager - the investment landscape is now all about transparency."