By Iona Bain

A row has erupted over whether fund managers are deliberately hiding extra fees from investors.

The Investment Management Association (IMA) has come out fighting over claims that the industry is obfuscating its high fees, conducting research to prove the accusations "do not stand up".

It analysed 129 active and passive funds in the UK, finding that actively managed funds carried transaction costs that were 0.31% of average assets, of which two-thirds was accounted for by stamp duty. In tracker funds, transaction costs totalled 0.06%.

The IMA maintained that the transaction costs for tracker funds were "very small" and are "on average" offset by investment returns for more actively managed funds.

The chief executive of the IMA, Richard Saunders, lambasted "false stories" about "so-called hidden charges which cost investors billions a year".

He adds: "If the accusation were true, it would show up in the net returns achieved by investors. But there is no sign of it. The accusations of hidden charges do not stand up."

But critics have hit back at the research, saying the use of the word "average" misleads investors into thinking that most or all funds will cover their charges through high returns.

Others maintain that charges are "not clear or transparent".

Adrian Lowcock, senior adviser at Bestinvest says: "What the IMA seems to be focusing on is whether the funds are expensive and offer fair value, but the issue for investors is they cannot work out whether funds are expensive because they are not told what all their charges are and what exactly they are paying for. Charges are not clear or transparent."