How Investment Trusts are Reducing Fees

Investment trusts are scrapping performance fees and simplifying charges in a bid to keep up with the new clean share class offered by open ended funds

Jackie Beard, FCSI 11 October, 2013 | 9:44AM

Until the arrival of the Retail Distribution Review, investment trusts were often heralded for being a cheaper investment than their open-end peers, albeit not in every case. With the RDR has come a greater focus on fees across all fund structures and it’s no surprise therefore that we’re seeing the price advantage often found in investment trusts erode away, as firms have started to launch clean share classes at their open-end funds resulting in lower headline fees.

However, it’s not just the OEICs at which asset managers are tinkering with fee structures. There have been a number of changes made at investment trusts too, particularly with regards performance fees. 

Since launching Morningstar’s qualitative ratings and research for investment trusts in January 2012, we have seen no fewer than seven closed-end funds and their boards scrap the performance fee element of their fee structure and that’s just at the funds where we have awarded a Morningstar Analyst Rating. These seven are all traditional equity funds, too – not funds of hedge funds, or alternative asset classes. This is an excellent demonstration of the value of an independent fund board, as in a number of cases such changes have been driven by the board, as well as the asset manager.

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About Author

Jackie Beard, FCSI

Jackie Beard, FCSI  is Director of Manager Research Services, Morningstar EMEA

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