Rathbones and Vanguard have been lauded for setting a high bar for their rivals as they become among the first asset managers to publish their value for money assessments.
Rathbones has sought to shift all retail investors into institutional share classes where it is able to do so, dropped fees on the UK-version of the Rathbones Ethical Bond fund in line with the Luxembourg equivalent and extended an existing fee discount on the Rathbones UK Opportunities fund due to underperformance.
The fund board at Vanguard has highlighted two active funds and two index products it is monitoring due to poor performance.
Lang Cat consultant Mike Barrett was impressed by both documents noting both were clearly set out and covered the relevant points set out by the FCA. “I think this is exactly what the FCA are expecting for these statements.”
Barrett also praised both fund houses for releasing the value for money assessments as standalone documents rather than “hiding it on page 78 of their annual report”.
Rathbones shifts almost 2,000 investments to cheaper units
Rathbones described its most notable change as shifting 1,982 investments into cheaper I and S share classes, which it said would save investors between £6.25 and £10 annually per £1,000 invested.
Initial fees have also been dropped across the eight-strong fund range.
While the fund board concluded the Rathbone Ethical Bond, Income and multi-asset funds had met their objectives and delivered overall good value for money, it singled out two funds for underperformance.
The Rathbones UK Opportunities fund, managed by Alexandra Jackson (pictured), was singled out for underperformance since Q4 2018, in the report dated to the period ending 31 October 2019. As a result the board decided to extend a discounted management charge of 0.45% that had been introduced when the fund was revamped from a recovery fund in 2017.
In the period since the UK general election in December, after the reporting period, the fund has tripled benchmark performance, returning 9.7% compared to 3.2% in the FTSE All Share, according to FE Fundinfo.
The Rathbones Global Alpha fund, created for a single client, will close due to consistent underperformance compared to the benchmark. A proposal from Rathbones to redesign the fund to invest directly in stocks and bonds, rather than via funds, was rejected by the unnamed client, who will bring the mandate in house.
Vanguard monitors four funds
Vanguard flagged up four as “amber” out of 29 funds assessed in a traffic light system in its value for money assessment published on Thursday afternoon.
Vanguard Global Equity and Global Equity Income, both active funds, were highlighted for lagging their benchmarks over one and three years, although the fund board said it would monitor the situation rather than take action due to the fact the funds had not yet reached their five-year track record.
In the passives space, the Vanguard FTSE Developed Europe ex-UK Equity Index and the FTSE UK Equity Income Index funds were flagged for not matching their benchmarks as well as their peers in their respective Morningstar categories. The fund board felt a switch from full to partial swing pricing in July 2019 should improve performance.
‘Bonus points’ for Rathbones’ value for money assessment
While Barrett praised both fund groups for setting a high bar for rivals yet to produce their first value for money assessments, he argued Rathbones deserved “bonus points” for taking action based on the assessment.
Jacqueline Lowe, formerly of Aberdeen Standard Investments and currently a member of the Investment Association investment funds committee, sits as an independent director on the Rathbones fund board alongside Michael Warren, formerly of Thames River Capital.
