Fund managers still pay too much for the secondary foreign exchange transactions that result from buying and selling shares globally, according to Russell Investments.

The lack of regulatory oversight in the foreign exchange market has meant fund managers get charged too much by custodians on foreign exchange trades and these inefficiencies detract from investment returns, Russell Investments managing director investment services David Rothenberg said during a visit to Sydney.

"The market is efficient for the people on the inside, but it is wholly inefficient because there is no trade reporting or regulatory body," Rothenberg said.

Although the foreign exchange market works with very small margins, using units that are 1/100th of a per cent, the spreads that investors get charged on international equities transactions are much wider, he said.

"If you look at the custodian contracts out there, they promised to be within 3 per cent of the day's pricing on each individual trade," Rothenberg said.

"We looked at that as an opportunity to differentiate Russell funds and as a service to the market place," he said.

Russell addressed the issue six years ago by establishing an agency trading desk, which centralises all buy and sell orders in its funds, and has been fine-tuning the services ever since.

"We try to offset trades and then we go out and simultaneously get pricing from multiple banks and take the best price," he said.

"It is a simple concept, but it is one that doesn't really exist today in the foreign exchange market."

Rothenberg said this method delivers cost savings of between four and 20 basis points a year in portfolios.