Value for money assessments that came into force this year have resulted in over £30m worth of savings for investors as asset managers transferred hundreds of thousands of customers into cheaper versions of their products.
From the end of January, the Financial Conduct Authority has required all asset managers to produce value for money assessments to reveal how their UK-domiciled funds stack up against peers on charges and quality of services.
The reports, which were one of the solutions to come out of the FCA’s two–year asset management market study, have resulted in sweeping changes across major fund groups, including fees being sliced across dozens of products, as well as high profile manager removals and funds being closed altogether following years of poor performance.
Analysis from The Times revealed the FCA-led crackdown has already resulted in massive savings for the end-investor.
Of the 12 reports it looked at from fund groups including M&G, Invesco, Vanguard and St James’s Place, the paper said investors’ savings ranged from 0.11% to 0.50% a year or about £55 to £250 on a £50,000 investment. Averaging the savings at £100, the annual total saved by investors would be £32.1m.
Much of these savings are the result of fund groups switching retail investors still in pre-Retail Distribution Review (RDR) share classes into cheaper unit classes of the same fund.
The Times reported a total of 321,000 customers had been transferred into less expensive share classes since January. But it noted the true figure is likely to be higher as only half of the fund groups it examined disclosed this number and a handful of companies, like Blackrock and Fidelity, have yet to release their reports.
Since the advent of RDR in January 2013, fund groups have created lower-costs versions of their funds without built-in commission. But thousands of investors who invested in products before then have been languishing in more expensive share classes.
Jupiter revealed it had transferred 49,000 investors into 69 new unit classes after it found half of its 40 funds, including James Clunie’s £322.9m Absolute Return fund and Ben Whitmore’s £1.6bn UK Special Situation fund, failed to demonstrate value for non-advised retail investors in its ‘R’ unit class.
Likewise, Columbia Threadneedle copped to the fact that 55 of its share classes demonstrated “poor value” and said it had moved all its 30,000 retail clients into the lowest cost share classes in May and applied fee caps to 32 share classes.
Schroders and M&G were also forced to re-evaluate fees across their fund ranges. M&G found that 86% or 38 out of its 44 funds, including Tom Dobell’s £1.4bn Recovery fund, had failed to meet their performance objectives or deliver value for investors and highlighted Richard Woolnough’s £3.2bn Corporate Bond fund as one product that had delivered value for money in “some share classes but not all”.
Baillie Gifford found all of its 37 funds charged less than the industry average. The Baillie Gifford Active Gilt Investment and Active Long Gilt Investment funds, the only two products not deemed value for money, were closed in January.
Similarly SJP gave all of its 36 funds top marks on charges compared with rivals in the relevant Investment Association sectors however it has been accused of not making like-for-like comparisons.
