Is the fund charges wind finally changing direction?
Over the years we have become known for giving fund management groups a hard time, challenging both performance and charges. In our view it’s an industry that tends to put its own interests before those of customers.
M&G has borne the brunt of our frustrations more than most in recent years; it did not appear to pass on economies of scale on its largest funds, charged seemingly excessive ‘administration’ fees to its funds (on top of its management fee) and has struggled with performance at times. All things considered, a poor advert for active fund management.
It was encouraging to see M&G finally reduce some of the administration fees it charges to funds last June (especially since most fund administration is now carried out by investment platforms, for which investors pay separately), along with token charge reductions on its largest funds to pass on some economies of scale. Not perfect by any stretch, but a start.
M&G has now followed this up by announcing reduced annual charges on 45 of its funds from 15 February. For example, the Optimal Income fund will fall from 0.90% to 0.65% and Global Dividend from 0.90% to 0.70%.
Being cynical, if M&G fund performance were better this announcement might not have happened.
Nevertheless, it’s a positive move and M&G deserves praise for breaking rank – the first large fund manager to make meaningful widescale reductions across its funds.
Whilst there has been healthy price competition in the world of index-tracking funds, active managers have largely been reticent to join the party, clinging onto their c0.75% annual management charges (with other costs on top).
M&G’s announcement also suggests the FCAs move requiring fund managers to publish annual ‘Value for Money’ reports is starting to have a positive impact.
Let’s hope M&G’s price cuts spur other managers to follow, even those performing well.
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