German Fund Fees Warning Could Have Wider Implications
It has emerged that the German consumer protection agency wrote a letter of warning in December to three of the country’s leading fund providers regarding their fund fees. Allianz Global Investors, Union Investment and LBBW Asset Management received letters from the Verbraucherzentrale Nordrhein-Westfalen regarding “unlawful” and unjustified investor charges and threatening the investment banks may have to repay years of fund fees if they do not address the agency’s concerns.
Individual meetings have been set up between the agency and all three investment houses and though commentators suspect the outcome will not include the repayment of fees, they could result in new regulations or guidelines regarding charging structures and would subsequently impact all fund houses operating in Germany.
The charges that the VNW is disputing are those associated with administrative costs of sending investors interim and annual reports, as well as performance fees included in the annual management charge.
Morningstar analysts are strong advocates of improved transparency and full fund fees disclosure and would welcome regulatory changes that require fund companies to clearly display fund costs so as to help the end investor make an informed choice.
AMCs only tell part of the story. The best measure of ongoing costs is a fund's total expense ratio, which includes most operating and admin costs, with the exception of trading costs and borrowing costs.
The fund fees debate goes beyond transparency, however. European investors by and large pay higher fund fees than their US cousins, and not just because of economies of scale enjoyed by the US investment industry versus those of European economies. Unlike the US market, few funds on this side of the Atlantic reduce their management fees as assets under management rise. In other words, even if European fund houses were able to gather more assets, there's no indication that they would pass along the cost savings that come with running larger pool of assets to investors. In contrast, it's common for US funds to specify a clear reduction in fees as assets grow. This is most often done at the fund level, but some large groups use their total assets under management to dictate the fee.
In the UK, the Retail Distribution Review, which comes into effect in 2013, should help to address some of the factors that push up costs. There has already been evidence that some fund companies are starting to offer funds labelled ‘RDR ready’ that do not include commission in their management fees, thus reducing the overall TER.
Bill Winters Starts Own Asset Management Company
The former number two at JPMorgan Chase, and co-CEO of its investment bank, put an end to recent rumours and this week announced that he has started his own asset management company Renshaw Bay.
Winters owns half of the company, of which he will be CEO and Chairman, and listed investment vehicles RIT Capital Partners and Reinet Investment are funding the other half.
In a statement, Winters, who has seat on the UK’s independent banking commission, said the new company’s objective is to “build a global alternative asset management and advisory business that provides outstanding and differentiated investment opportunities for our founding shareholders as well as other sophisticated investors who value our strong focus on risk management and alignment between investors and investment managers."
CB Richard Ellis Becomes the World’s Largest Real Estate Fund Manager
CBRE has agreed to buy the majority of ING’s real estate investment management business for $940 million, making it the largest real estate fund manager in the world with close to $100 billion under management.
ING has also agreed to sell up to $100 million of its stake in ING Real Estate Investment Management (REIM) funds.
ING REIM Europe, ING REIM Asia and US-based real estate manager Clarion Real Estate Securities will all step from under ING’s umbrella, where ING Real Estate Development and ING Real Estate Finance will remain.
The deals are expected to be completed in the second half of 2011, subject to shareholder approval.
More ‘Streamlining’ at Henderson Global Investors
Having only just finished rearranging its multi-manager team and funds following two manager departures, Henderson Global Investors is now proposing to merge two of its Socially Responsible Investing funds, the Henderson Global Care Growth into the Henderson Industries of the Future, resulting in one fund of around £330 million assets that will continue to be managed by Tim Dieppe.
The move aims to “provide greater focus and clarity” to Henderson’s SRI range and is subject to approval from the FSA as well as shareholders at an EGM on April 28.
Henderson Global Investors and Gartmore, which is in the process of being taken over by Henderson, are expected to confirm next week the start of a staff streamlining process. Henderson last month named several key Gartmore personnel who will stay on following the completion of the takeover but no formal announcements have yet been made about the rest of Gartmore’s staff.
Manager Departs Underperforming Neptune Fund
Karim Ladha, manager of the Neptune European Income fund has left the investment company as of last Friday by mutual consent. The fund had trailing returns of just 2.5% over the 12 months leading up to Ladha’s departure and underperformed the Morningstar Europe ex-UK Large-cap Equity category by 13.5% in that time. In 2010, the fund suffered total returns of -1.0%. Neptune Head of European Equities Rob Burnett and his team have taken over the management of Ladha’s fund.
Aegon Targets Retail Investors with Multi-Asset Offering
Aegon Asset Management will next month launch a new multi-asset fund aimed specifically at individual investors that will target annual returns of 10% over a three-year period by across all market conditions. The Aegon Strategic Asset fund will invest principally in equities and fixed income assets via long-only positions, and will be jointly managed by Head of Investment Strategy William Dinning and multi-asset manager Sean Flanagan. The minimum initial investment is £500 with an initial charge of 5.5% that is discounted until March 1, 2012, and an annual management charge of 1.5%.
Harewood Solutions Looks to Reduce US Large-Cap Volatility
BNP Paribas subsidiary Harewood Solutions is to launch a UCITS III US Enhanced Income fund on Monday February 21 that exposes investors to the S&P 500 but operates an optimised covered call strategy to minimise volatility, thus targeting a yield of 8% per annum.
A similar strategy has already been on offer to Harewood Solutions’ closed-end fund investors in the UK. The new OEIC demands a minimum initial investment of £1,000 and charges an annual management charge of 0.75% plus a maximum initial charge of 1%.
Investec Expands Emerging Market Debt Range
Investec Asset Management has launched two more emerging market debt funds—the Investec GSF Emerging Markets Local Currency Dynamic Debt fund and the Investec GSF Emerging Markets Currency fund. Both are Luxembourg-domiciled SICAVs and will be managed by Head of Emerging Markets Debt Peter Eerdmans and the latter co-managed by Werner Gey van Pittius.
While the Dynamic Debt fund will use long and short position to expose investors to emerging market debt in 23 of the more liquid emerging markets, the Currency fund will expose investors to a basket of 36 actively-managed emerging market currencies.
London & Capital Launches Managed Portfolios for American Ex-Pats
London & Capital has launched a range of managed portfolios that are US-tax compliant and are therefore aimed at American investors domiciled outside the States. Recent changes to US tax law has led to demand for such products, London & Capital said, and the US Managed Portfolios not only comply with US requirements but also UK tax-efficiency wrappers such as ISAs. Minimum initial investment is £10,000.
UBS Broadens Asian Debt Range
UBS Global Asset Management has launched a new Asian fixed-income fund that invests primarily in local currency government bonds from Asia ex-Japan. The UBS (Lux) Asian Local Currency Bond fund is managed by Ben Yuen and has an annual management charge of 1.4%.
Morningstar Names Nominees for Qualitative Manager of the Year Awards
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