For many years, the Australian market has had a reputation for being too focused on fees.

The regulator’s obsession with detailed disclosure is evidence of that. But at least ASIC is prepared to contemplate whether the disclosure of fees and costs under RG 97 actually produces more transparency for consumers. A review of RG 97 by Darren McShane was due at the end of June.

Some funds, including our cover story subject, Local Government Super, have pointed out that the current disclosure requirements create a bias towards the minimisation of investment costs, which in turn biases investors away from active management.

But LGS, and other funds such as TelstraSuper, are 100 per cent actively managed, and have proven they can add value, after fees, from active management.

Instead of a pure focus on fees and costs, the conversation needs to be about the value being generated. And my hope is that will be an outcome of McShane’s review.

No one, including LGS, is arguing that reducing investment costs is a bad idea, especially in active management. But the focus should be on aligning interests, allowing asset managers and asset owners to have a shared purpose and shared returns after fees.

The recent overhaul of active management fees by the world’s largest pension fund, the US$1.4 trillion ($1.9 trillion) Government Pension Investment Fund of Japan, demonstrates this.

About 20 per cent of GPIF is actively managed, but between 2014 and 2016, only a small number of the fund’s active managers achieved the target excess return their mandates dictated. This, and some self-reflection from GPIF on its manager selection capabilities, prompted it to revise fees, with the aim of better aligning them with performance.

The result is that, for active management, the fund’s base fee will now be lowered to that of a passive fund and a ‘carry over’, which partially accumulates payment of annual performance based fees to link them with mid- to long-term investment results, has been introduced.

In a quid pro quo, the fund has also introduced multi-year contracts for managers. GPIF’s costs in fees are not astronomical. For fiscal 2016, the total was ¥40 billion ($370 million). This represents an average rate on the investments of about 0.03 per cent.

But that doesn’t seem to be the point. GPIF was looking for a way to align managers with its purpose and, ultimately, have managers do what they say they will do.

Doing so puts the focus on value, not costs.