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Baillie Gifford and Vanguard Cut Fund Fees

New You Can Use: The past month has seen a number of new income funds launch, plus fund managers cutting fees

Emma Simon 26 January, 2017 | 12:07PM

The so-called ‘Santa rally’ has continued well into January, with the FTSE 100 reaching new highs and enjoying its longest winning streak for two decades.

While this record-breaking run stalled in the second half of this month, there was still a lot for investors to remain cheerful about. Several investment companies have cut management fees, and there are a number of new fund launches on the horizon, as asset management companies look to capitalise on what they hope will be a more positive ISA season.

Elsewhere Alliance Trust (ATST) unveiled more details of its restructuring plans.

Alliance Trust Unveils New Managers

The board of Alliance Trust, one of the UK’s oldest investment trusts, has revealed details of its new multi-manager approach. It has selected eight specialist equity managers, who will typically select 20 stocks each. This will make up the combined portfolio of the trust, which will then be run by Willis Towers Watson, who are experienced in running multi-manager portfolios.

The eight equity managers include: Black Creek Investment Management, First Pacific Advisors, GQG Partners, Jupiter Asset Management, Lyrical Asset Management, River & Mercantile Asset Management, Sustainable Growth Advisers and Veritas Asset Management.

Shareholders will vote on whether to accept these proposals on February 28.

This move follows poor performance at the trust over the past few years, which has led to a board shake-up and the decision to ditch its team of in-house investment managers.

David Holder, fund analyst at Morningstar said: “The proposed best-in-class, concentrated global multimanager approach bears some similarity to that used at Witan and has merit if well executed. However, we would dispute the chairman’s view that this is an ‘exciting and differentiated’ approach. Currently there is limited visibility on the performance of global strategies advised upon by Witan, and we await much greater detail as to the nature and implementation of the proposed new investment strategy. The board remains committed to continue the very long-term record of dividend growth which is to be applauded, but perhaps a more radical approach could have been to consider an enhanced distribution policy.”

New Robotech Fund

Axa Investment Managers is looking to the future with the launch of its new Robotech fund which will be managed by Tom Riley and Jeremy Gleeson. 

The fund will invest in companies that are developing and utilising new robotic and automated technology. It will be a global fund, that will invest both small and large cap companies across different sectors, including manufacturing, healthcare, transportation and technology.

The funds, known as the Axa World Funds Framlington Robotech fund, will be Luxumberg-domiciled and have an ongoing charge of 0.79%.

Mark Beveridge, global head of Framlington Equities at Axa Investment Management said: “We fundamentally believe you need an active manager to access new growth areas such as robotics - there is no broadly used standard robotics benchmark that you can try to replicate.”

He estimated that the robotics market is set to grow at 10% a year until 2025.

Schroder Launches US Income Fund

Schroder is launching a US version of its popular Income Maximiser fund, which will target a yield of 5%. This is a far higher yield that comparable funds in this sector. The fund is due to launch in March this year, and aims to have a charge of between 0.4% and 0.5%.

Schroders said the fund would track the S&P 500, while also taking out call options on certain stocks as a delivering additional yield.

Rupert Rucker, product manager for the Maximiser fund range at Schroders said the fund was for investors want exposure to US equities but still want income. “We felt we were able to offer a much better proposition than currently exists in the market.”

The UK version of this fund currently has a four-star rating from Morningstar, reflecting its strong performance in recent years relative to peers.

Vanguard Cuts Fees

Investment titan Vanguard has cuts the annual management fees again on its range of Lifestrategy funds. These ongoing charges has been reduced from 0.24% to 0.22%, the third cut since these funds were launched in 2011.

These funds offer risk-rated portfolios, which invest in global fixed income investments and equities. The portfolios range from a 20% equity exposure to a 100% exposure.

This range of funds have proved popular with investors, and now have more than £5bn now invested in these portfolios.

Fees Cut on Baillie Gifford Fund

Baillie Gifford cut the management charges from on its £502 million American fund at the start of 2017. The management fee has been reduced from 0.65% to 0.5% bringing it closer in line with other funds in the Baillie Gifford stable. The fund, which has a three-star rating from Morningstar, is managed by Gary Robinson, Helen Xiong and Tom Slater. James Budden, director of retail marketing and distribution at Baillie Gifford said this fee cut would enable this actively managed fund to compete with passive funds in this sector.

He added: “Received wisdom has it that active management does not work in the US market given its supposed efficiency. We happen to believe the opposite can be true, and by cutting our fee on this fund we are giving ourselves and its investors a greater chance of beating the index over the long term.”

Woodford Favours Aviva

Neil Woodford, founder of Woodford Investment Management, has began building a “modest position” in Aviva (AV.), the life insurance company. The decision by the star fund manager to buy, or sell stocks in certain sectors are closely followed by many investors. In a recent blog post he said he was investing in Aviva based on the company’s “good management" and "attractive valuations”, adding that these were characteristics shared with Legal & General.

But he added: “Aviva, although broadly similar to Legal & General, has a portfolio of different growth drivers in savings and protection markets and we deemed it attractive enough to start building a modest position.”

This follows Woodford's decision to reduce his fund's exposure to the insurer Hiscox, which offer general insurance rather than life and pension products.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Alliance Trust Ord805.00 GBX-0.12
Aviva PLC389.40 GBX0.21
Baillie Gifford American A Acc723.92 GBP-0.57
Schroder Income Maximiser A Acc1.13 GBP0.53

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk

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