Expected to launch in March, 7IM said the decision would reduce the total expense ratio from roughly 1.3% to around 0.8%, using a combination of passive and ‘smart passive’ underlying vehicles to offer a more predictable and lower cost income stream.
Head of corporate development Justin Urquhart Stewart said it was an obvious move given the scalability of the business and the inability of many active managers to regularly beat the index.
The £68m fund will join the range of 7IM Asset Allocated Passive (AAP) Funds, and will see its annual management charge halve from 1% to 0.5%.
The fund, which will sit in the IMA Mixed Investment 0-35% Shares is still expected to deliver a similar yield of around 3.7%, but without the additional cost of active management.
The remaining four multi-manager funds – 7IM Moderately Cautious, Balanced, Moderately Adventurous and Adventurous – will retain their existing structure as the active managers involved are still regularly beating their passive equivalents.