It seems appropriate that the start of Autumn has been marked in the investment industry with a series of departures and fund closures - none of which may be particularly welcomed by investors.
There is continued disquiet over poor performance in the mining sector
Investment Association Shake Up
The biggest news this month was the resignation of Daniel Godfrey from his position as Chief Executive of the Investment Association (IA), after several large fund groups threatened to quit the trade body.
Fund managers including Schroders and M&G were unhappy about the speed at which he had tried to drive through change within the organisation. They – along with Fidelity and Invesco Perpetual – refused to sign up to the IA’s latest ‘Statement of Principles’.
Critics within the fund management industry said Godfrey had failed to promote the industry effectively and was trying to make the body act more like a regulator. But his supporters blamed the fund management industry for resisting moves on fee transparency and boardroom pay.
Either way it is clear his successor will have his or her work cut out to heal these rifts and ensure members are pacified, while convincing a sometimes sceptical public that the industry is working in their favour.
Director of Risk Compliance and Legal at the IA Guy Sears has become interim Chief Executive while the organisation looks for a permanent replacement.
Tech Fund Closes
There was a spate of fund closure announcements this month. Man GLG led the way, announcing that Technology Equity fund would close, after its two managers confirmed they were leaving the firm later this year.
Those invested in this £200 million fund will be offered a free switch into other portfolios within the Man GLG group. Performance has been roughly in line with the market in recent years. Over five years it has returned 67.4% to investors, slightly behind the sector average of 69.1%.
However, while there has been renewed interest in technology funds in recent years following the flotation of tech giants like Facebook, the assets under management remain significantly below the peak seen at the turn of the millennium. This has led to a number of fund management groups closing these specialist funds over the years.
An Environmental Disaster
A similar lack of interest from investors was behind the decision to close L&G Global Environmental Enterprises fund. This will close in early November, with assets returned to investors, a process that is expected to take around two months. Assets under management had dwindled from £43 million to just £15.7 million – a level which L&G said made it ‘commercially unviable’ to run.
Bond Spectres
Axa Investment Managers announced it is closing two of its bond funds. Again this has been due to dwindling interest from investors alongside a shortage of suitable assets to invest in.
The company will close the Sterling Long Gilt Fund with £41.7 million assets under management and the Sterling Long Corporate Bond fund at £35.4 million on November 20. Both have been around for more than a decade.
The managers are staying with the company - running its segregated portfolio and its short credit bond fund. There have been concerns about the bond bubble bursting and Axa said it did not anticipate the high demand for these funds returning.
Income Fund Fee Cuts
There was some good news for investors though with Kames announcing it is to cut fees on its Diversified Income fund. The annual management charge has been cut from 0.65% to 0.55%, with effect from November 1.
The company said this move was to target pension savers, as it now made the fund competitively priced when compared to the government cap of 0.75% annual charge on pension funds.
The fund was launched last year and now has £268 million under management, is run by Vincent McEntegart. It aims to deliver a sustainable level of income with the potential for capital growth over the medium term and has returned 8.2% in the last year.
BlackRock Cuts Charges
Kames isn’t the only fund manager squeezing its fees. BlackRock has simplified its charging structure on its World Mining Trust (BRWM) run by Evy Hambro and Olivia Markham which will mean all investors will pay less as a result.
Investors now pay a flat 0.8% fee regardless of the assets under management; previously fees ranged from 0.85% to 1.2%. This is the second fee cut imposed this year, reflecting investors continued disquiet over poor performance in the mining and commodities sector. Over the year the trust is down 33%. The trust currently has £396 million under management – down from a whopping £1.4 billion in 2011.
New Bond Hits UK
No, it’s not Daniel Craig in the local multiplex, but a new bond issue from the UK Treasury. This three-year bond is the first to be issued in the Chinese currency, the Reminbi (RMB). It will pay investors 3.1%.
This is the first time any organisation in the West has issued RMB-denominated bonds. Aside from sterling bonds the UK Government has also issue bonds in US and Canadian dollars, euros and yen.
