M&G is slashing fees across 45 of its mutual funds next month in a move fund selectors believe makes it more competitive with peers, especially in fixed interest.
The asset manager said the cuts affect 75% of its assets under management and apply to some of the firm’s flagship funds, including £3.1bn Corporate Bond, £2.1bn Strategic Corporate Bond and £2.3bn Optimal Income funds.
The changes, which apply from 15 February, come as part of an internal review of M&G’s UK range looking at charges, performance and services by fund and share class.
Richard Woolnough’s (pictured) M&G Optimal Income fund will see the annual charge on the I share class drop to 0.65% from 0.9%. His M&G Strategic Corporate Bond will carry a new charge of 0.45% for the I share class, down from 0.65%, while the M&G Corporate Bond fund will also be priced at 0.45%, down from 0.65%.
Other strategies affected include Positive Income which will cost 0.7% rather than 0.85% and Stuart Rhodes’£2.5bn Global Dividend fund, for which the I share class will carry a 0.7% charge, down from 0.9%.
The I share class for the frozen M&G Property Portfolio will remaining at 0.85% although the asset manager continues to waive 30% of the annual charge during the suspension.
An M&G statement said: “These changes will increase the competitivity of our range in the UK market, putting M&G on a stronger footing to retain and grow our assets under management.”
The cuts build on other measures taken to improve value, including the addition of economies of scale discounts implemented by the fund group in 2019 whereby fees reduce by 2 basis points for every £1bn of assets under management in a strategy. The firm has also abolished entry and exit fees.
‘The bond funds are very good, but they were just expensive’
Fairview Investing consultant Ben Yearsley described it as an overdue move which makes M&G more competitive, particularly in the fixed income space.
“Fixed income has been their jewel in the crown, their equity funds are lacklustre. The bond funds are very good, but they were just expensive.
“This is a really good move for them and makes them competitive in many areas again – especially the bond space.”
Yearsley said old legacy businesses typically have expensive funds with large amounts of money in them which makes it painful to cut fees, especially if they are a listed business as well.
AJ Bell head of active portfolios Ryan Hughes welcomed the announcement as a step in the right direction for an active manager that was “beginning to look a little uncompetitive, particularly on the fixed interest side”.
“While these moves haven’t made them the cheapest in the sectors, it certainly puts them more in the pack, for example the Corporate Bond is 0.20% cheaper at 0.45% but that’s still more expensive than the likes of Twentyfour and Artemis and 0.35% more than the cheapest ETF.
“We can only hope that other active managers take note and that an element of price competition finally emerges in active management, after all, this is the only way that they will be able to properly take on the threat of passive investing.”
