Fund Closures: Managers Looking After Your Interests?

Preserving the interests of existing shareholders is laudable, but are soft-closures an effective tool for stemming the flow of new money?

Cherry Reynard 25 April, 2014 | 9:35AM
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The top funds are starting to resemble a series of exclusive nightclubs - only available to a select few investors, who are already well-known to management. This week saw HSBC take steps to slow flows into its popular frontiers fund, while St. James's Place stepped in to control the size of its Asian and UK strategies.

The trend started with the major emerging market franchises at Aberdeen and First State, who both took steps to slow investment into their funds after fund flows threatened to create liquidity problems. It has gathered momentum since: Schroders has soft-closed a number of its small-cap and Asian-focused funds, Standard Life and Fidelity have also soft-closed funds.

It represents a profound change of sentiment for an industry previously focused more exclusively on asset gathering. In many ways, it is a welcome change. It is reasonable to assume that fund managers perform better when bulging assets do not constrain their flexibility. It suggests that fund managers are more concerned with preserving the interests of existing shareholders rather than rapacious asset gathering, a laudable objective.

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Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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