AJ Bell has slashed prices across a trio of popular funds from its passive multi-asset range by up to 20% but is still trailing larger groups on fees.
The passive multi-asset range was launched by AJ Bell in March 2017 with OCF capped at 0.5%. The funds are overseen by AJ Bell’s investment team.
| Fund | Existing OCF | New OCF |
| AJ Bell Balanced | 0.47% | 0.40% |
| AJ Bell Adventurous | 0.50% | 0.44% |
| AJ Bell Moderately Adventurous | 0.50% | 0.44% |
Source: AJ Bell
The cuts are part of AJ Bell’s commitment to passing on cost efficiencies as the funds grow in size.
AJ Bell Balanced, the largest fund in the range, has seen the biggest reduction in charges since launch. Including a preliminary cut to charges last June, which took OCF from 0.50% to 0.47%, the fund has seen its OCF drop by 20%. It had £45.58m of assets at the end of December 2018, according to Trustnet.
AJ Bell Adventurous and AJ Bell Moderately Adventurous, which have seen charges cut 12%, had £30.17m and £30.60m in assets respectively.
Not the cheapest option
Darius McDermott managing director of Chelsea Financial Services said AJ Bell is “clearly moving in the right direction but that doesn’t mean they’re the cheapest in the market”.
He noted that comparable passive, multi-asset funds from Legal & General Investment Management and Standard Life Investment’s Myfolio range have lower charges.
LGIM’s risk-rated Multi-Index funds have an OCF of 0.31% across the board, while SLI’s low cost Market fund range boasts an OCF of 0.37%.
It should be noted that the Multi-Index and Myfolio Market ranges are much bigger than AJ Bell’s passive multi-asset range standing at around £2.6bn and £3.9bn respectively, meaning they would be expected to have more leeway when bringing down costs. AJ Bell’s range has around £142m in assets across six funds.
Standard Life Myfolio also undercuts AJ Bell’s passive range on AMC. While the funds in AJ Bell’s range have a fixed AMC of 0.15%, the Myfolio funds have an AMC of 0.075%.
LGIM does not quote the AMC on its Multi-Index range on Trustnet.
Passing on economies of scale a no-brainer
AJ Bell chief investment officer Kevin Doran (pictured) said the firm’s approach of leveraging its scale to pass on savings to customers is not something everyone in the industry currently takes advantage of.
“It is an oddity in the fund management market that despite many costs that fund managers incur being fixed, the percentage charge that customers pay often doesn’t decrease as the funds grow in size,” Doran said.
McDermott said that no manager “with any brains” would not be thinking about how they can use their size to negotiate better costs.
“All anecdotal evidence that I have seen is everybody is using their bulk or size, if they have any, to try and get better costs.
“Any structure you’re in, there’s an OCF and you’re going to want to keep your costs down,” he continued. “Whether that’s passive or active it makes no difference, you’re still going to want to get the best price you can for your own fund and for your own investors.”
