In a note on its website, it said the Aegon Merian Global Strategic Bond fund hasn’t grown as expected and therefore all remaining investors will be moved into the Scottish Equitable Kames Strategic Bond fund.
The Merian mirror fund, run by Mark Nash (pictured) and Nick Wall, will close on 15 October 2019 as the fund is too small at £2.9m to be economically viable, it said. The underlying Merian Global Strategic Bond fund has assets totaling £136m.
The Scottish Equitable Kames Strategic Bond fund holds £14.5m, according to a factsheet from March. It is a mirror of a fund run by Alexander Pelteshki, who joined Kames in 2014 and the fund in August 2017, and Colin Finlayson, who joined the firm in 2000 and has been on the fund since its launch in 2003.
“We’ll be writing to all those affected by these changes in advance to let them know about the closure, which applies across our pension and Aegon Retirement Choices (ARC) fund ranges,” it said.
Kames team has been shedding fund managers
Shore Financial director Ben Yearsley said: “It seems a bit odd forcing investors from one manager to a totally different one – especially to Kames when they have lost half their team recently.”
Last year, four fund managers responsible for £5bn worth of fixed income funds defected from Kames to Artemis including Stephen Snowden and David Ennett. It came just over a year after David Roberts and Philip Milburn exited to join Liontrust. The fixed income team is now managed solely by Adrian Hull who was previously the co-head of fixed income.
A spokesperson for Aegon told Portfolio Adviser an analysis was undertaken of all similar funds in its range in order to identify an suitable alternative.
Merian versus Kames mirror bond fund performance
|Aegon Merian Global Strategic Bond (ARC) Pn||5.85||7.71||8.37||12.13|
|Aegon Merian Global Strategic Bond Pn||5.33||6.64||5.17||6.66|
|Kames Strategic Bond (ARC) Pn||5.75||5.97||12.73||17.47|
|Kames Strategic Bond Pn||5.33||5.12||10.06||12.86|
|IA Sterling Strategic Bond||5.37||5.95||11.69||21.98|
|PN Sterling Strategic Bond||4.99||4.85||10.61||18.58|
Source: FE Analytics
“The Scottish Equitable Kames Strategic Bond has provided better returns over 1, 3 and 5 years when compared against the Merian fund and has done so with lower levels of risk than the alternative funds analysed and similar risk to the Merian Fund. It is on this basis that the fund was selected as the alternative. “However, investors are able to switch their investment and redirect any future investment, free of any switch charge, into an alternative fund or funds of their choice.”
Kames fund is pricier
The fund charge for ARC investors will increase from 0.60% to 0.80% but the total fund charge for pension investors will remain the same.
AJ Bell head of active portfolios Ryan Hughes said given the new fund is 0.20% more expensive, investors should consider whether it is appropriate for them.
Hughes said the closure may be interpreted as an opportunity for Aegon to internalise assets into its fixed interest team in much the same way that Quilter did in recent years and “it will be interesting to monitor whether further funds are closed in this manner”.
Platforms make mirror funds obsolete
The Aegon Merian Global Strategic Bond fund is a structure that is reflective of the “old approach to open-architecture” when pension companies launched mirror versions of external funds, said Hughes.
He said: “The advent of more modern platforms has largely made this approach obsolete with most platforms having direct links to the underlying external funds, however, it is a reminder for investors in old style pension contracts that pension companies have the ability to change their investments to an entirely new fund.”
Willis Owen head of personal investing Adrian Lowcock said closing the fund is the right thing to do for both companies and investors. “Whilst it is clearly disappointing news for Merian, they have a range of fixed income funds which cover a broad spectrum of the market and there is no long term benefit to be gained from running a fund which is economically viable.
A spokesperson for Merian Global Investors said: “Following a number of fund range refinements, the MGI fixed income desk has performed well over the last year and we’re pleased with how its profile is growing in the industry.”