Fund managers have to offer investors fee information in their funds' product disclosure statements and in their ongoing quarterly fund updates.

Fees that must be disclosed include management and administration charges, performance fees and the fees of any underlying funds the fund manager invests in. If they cannot get an accurate representation of the underlying funds' fees, they need to be able to explain why not.

This is designed to give investors a clear view of the total fees involved with the fund structure.

But the Financial Markets Authority said the definition of an underlying fund was broad.

"It is broader than just funds that are investment options in licensed managed investment schemes."

That has prompted questions from some managers, who were otherwise generally supportive of a move to more fee transparency and standardisation of reporting.

Devon said listed property companies could be an issue because they did not usually publish an expense ratio.

Salt asked about infrastructure companies and NZAM raised the question of underlying hedge funds.

John Berry, of Pathfinder Asset Management, said he was interested in how funds investing in listed private equity or venture capital vehicles would be treated.

"I am a director of Punakaiki Fund Limited which we plan to list at some stage in the future.  There are other private equity managers thinking along similar lines. Private equity vehicles are actively involved in their investments and generally charge a 2% management fee.  If a growth or balanced KiwiSaver fund was to invest in a listed private equity vehicle, would the KiwiSaver be required to include the 2% management fee as part of their fee disclosure?  This remains an open question."

He said, as a matter of policy, New Zealand should be encouraging KiwiSaver funds to invest in private equity vehicles via listed entities.

"Including the 2% fee in the management charge would potentially kill this because the push is for KiwiSaver to demonstrate lower and lower fees.  Three key objectives for long term investing via KiwiSaver are not all compatible - consistently lowering fees, disclosing every fee or charge in every underlying investment and giving investors access to alternative, potentially high performing, long-term growth investments like private equity.  Only two of these three can ever be achieved. 

"The guidance note leaves a grey area.  Does the KiwiSaver fund invest in a listed private equity entity to have the benefit of the changes in share price of the entity, or to get access to the underlying investments of the entity?  In the former case the management fee does not flow through, in the latter it does."

He said it seemed that the FMA was leaving the possibility of some listed private equity entities not to be treated as underlying funds. "From a policy perspective I would support this outcome."