Fidelity Fee Change and New Income Options

NEWS YOU CAN USE: This month saw a flurry of income fund launches and further details of Fidelity’s new performance fee

Emma Simon 1 December, 2017 | 7:08AM
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November has proved to be another busy month, with a flurry of fund launches and fund manager moves. Income continues to be a key concern for investors, so it is perhaps not surprising that the new funds were focused on bonds and income. There were also further details of how Fidelity, one of the world’s biggest fund managers, plans to move towards performance-related pricing.

The financial headlines were dominated by the Budget. The Chancellor Philip Hammond delivered a safe but steady budget despite a background of lower growth forecasts and continued Brexit uncertainty.

But despite this gloomier outlook, fund sales continued to boom, although sales of UK funds remain sluggish.

Fidelity Unveils Performance Fee

Fidelity International unveiled details of its new fulcrum fee, which will introduce an element of performance pricing to its fund charges. This new fee structure will be introduced in March on a selected range of funds, including the group’s flagship Fidelity Special Situations fund.

On these funds the manager will charge a higher fee if the fund outperforms its benchmark over three years. The fee will fall to a baseline minimum if the managers don’t achieve this objective. This will result in a reduction in the annual management charge on this new fee share class by 0.1%

This Special Situations fund currently has an annual management charge of 0.65%. Under the fulcrum fee this will vary from 0.45% to 0.85% depending on the performance of the fund.

The four other funds to adopt this charging structure are Fidelity European, Asian Dividend, Global Special Situations and American funds.

Fidelity says this system aligns the firms’ and clients’ interests and is intended to promote value active management. However, it has been criticised for being overly complex and could lead to investors overpaying for funds which simply track their benchmark.

Further Blow for Woodford

Aviva is the latest investment house to pull money out of Woodford Equity Income, run by veteran manager Neil Woodford. It is understood that Aviva is moving around £30 million of capital invested through its company pension schemes. It has written to customers asking them to choose an alternative income fund. Those that do not reply will be automatically moved into Threadneedle UK Income.

Last month Jupiter announced it had also dropped its investment in Woodford’s Equity Income fund. This fund has suffered from poor performance over the past few months, relative to peers, causing the manager to issue an apology to investors.

Henderson Loses European Team

Asim Rahman, the co-manager of three European funds is to leave Janus Henderson in January. He co-managed Henderson European Selected Opportunities fund, the Henderson European Focus fund and Henderson Gartmore Continental European fund.

Meanwhile, it has been announced that two of Henderson’s senior European analysts will be joining Schroders as fund managers in February next year.

Bill Casey and Nick Kissack have now left the company and are on gardening leave. Details about their new responsibilities at Schroders have yet to be announced.

Evenlode Launches Global Income Fund

Evenlode launched its Global Income fund at the start of November. The fund will be run by the Evenlode’s co-founder Ben Peters, alongside manager Chris Elliot.

The fund will have same investment process as the group popular UK-focused Evenlode Income fund. This successful fund has achieved a five-star performance rating. The fund aims to invest in a combination of household names and what Peters terms “smaller hidden champions”. Ahead of the launch Evenlode revealed the fund would invest in large cap companies, such as Microsoft (MSFT) and Procter & Gamble (PG) alongside less well known entities, such as Wolters Kluwer (WKL) a Dutch-based digital company and Finnish escalator and life manufacture Kone (KNEBV).

Vanguard Launches 2 Bond Funds

Vanguard has launched two new corporate bonds funds. The Vanguard Global Short-Term Corporate Bond Index will invest in bonds that have a one- to five-year duration.

It is also launching the Vanguard Global Corporate Bond Index fund, which will focus on investment-grade debt. Both funds will have a global focus.

Charges for these passive funds will be 0.25% for the investor share class. The fund will track the Bloomberg Barclays indices.

Nomura Launches European Bond Fund

Nomura has launched a European High Yield Bond fund for UK investors. The Dublin-based UCTIS fund will be run by Steven Rosenthal, and will be benchmarked against the BOAML European Currency High Index.

The fund will have the flexibility to invest across the high-yield credit spectrum, identifying “strong horse” companies that can carry their debt load through economic cycles. It has been available to investors outside the UK since 2012, and has delivered annualised returns of 9.3 per cent since then.

Rosenthal is executive director of Nomura’s analyst-driven investment boutique, which specialises in credit investment.

Global Fund Sales Soar, UK Funds Slump

Fund sales hit record figures again, according to data published this month by the Investment Association (IA). The data refers to fund sales in September, where net retail sales hit £5.6 billion. This surpassed the previous record, set in April this year.

The IA said that with data still to be collated for the last quarter of the year, figures for the year so far already surpassed sales for the best year on record.

The best-selling asset class in the third quarter of the year was fixed income, with net retail sales of £4.9 billion. This was despite expectations of interest rates rising over this period.

The best-selling sector was Global, with net retail sales of £1.5 billion. However, this trend was reversed when it came UK equity funds, which experienced net retail outflows of £103 million.

Hargreaves Lansdown’s senior analyst Laith Khalaf said: “It’s been a bumper year for fund sales across the industry, after a very disappointing 2016, which suggests investors are returning to the fray in large numbers. However, sales of UK equity funds have been abysmal in 2017, continuing last year’s trend, which suggests a high level of pessimism towards the domestic stock market.”

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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Fidelity American A Acc GBP6,535.04 GBP0.26Rating
Fidelity Asian Dividend W Acc244.10 GBP-0.12Rating
Fidelity European W Acc2,890.09 GBP0.56Rating
Fidelity Global Special Sits W Acc6,536.02 GBP0.15Rating
Fidelity Special Situations5,216.08 GBP-0.38Rating
Janus Henderson European Sel Opps I Acc3,192.17 GBP0.73Rating
Janus HndrsnContinen Eurp G2 EUR22.76 EUR0.42Rating
KONE Oyj Class B41.78 EUR0.00Rating
LF Equity Income C Sterling Acc0.98 GBP0.00
Microsoft Corp378.61 USD0.00Rating
Procter & Gamble Co165.33 USD-0.10Rating
TB Evenlode Global Income B EUR Acc1.83 EUR0.75Rating
TB Evenlode Income B Acc427.30 GBP0.29Rating
Wolters Kluwer NV151.25 EUR0.97

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for

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