The firm made significant cuts in May last year as part of a stated plan to become the market leader in the space on price, and, according to Ben Waterhouse, head of UK retail sales at the firm, since then assets under management within the funds has doubled.
However, competitors such as BlackRock and Vanguard have since cut their prices as well. As a result, Fidelity felt that further action was needed to maintain its lead.
According to john Clougherty, head of UK retail at Fidelity, while there is no way to know for certain what the effect on flows will be, the firm believes that price is, and will remain, the leading consideration when clients select passive funds.
“We don’t have a crystal ball, but I do believe that this will result in flows into the funds and we will continue to ensure that people are aware of where our fees are.”
Asked where the floor might be for passive pricing, Clougherty said that was impossible to know as the dynamics of the market change over time. But, he added: “The market is efficient, but we do genuinely believe that there are too many passive funds with too many investors paying too high a price for indexation.”
The changes to fund charges will take place from 1 October and will see the ongoing fee on the firm’s UK fund fall from 0.07% to 0.06% and the charge on the US fund from 0.08% to 0.07% via the Fidelity Index UK fund via Fidelity’s adviser platform FundsNetwork and to certain wholesale clients.
