Ballie Gifford cuts fund fees and challenges others to follow suit

Baillie Gifford has cut fund charges across its entire open-ended fund range, in order to allow its investors to benefit from economies of scale being achieved by the firm.

The fee reductions, which will lower both the management fee and the ongoing charges figure (OCF), will be applied from the start of October. As a result of the changes OCFs will fall between three and 10 basis points.

Key changes include: the Baillie Gifford European fund, which will see its OCF fall from 0.7 per cent to 0.6 per cent, Baillie Gifford Japanese fund, down from 0.68 per cent to 0.63 per cent, while the Baillie Gifford Global Alpha Growth fund will now have an OCF of 0.6 per cent, as opposed to its current 0.68 per cent charge.

Investors in the £1.8 billion Baillie Gifford Japanese fund, for example, would collectively pay an OCF of £12,240,000, but this will now fall to £11,339,900 – a difference of £900,100.

Andrew Telfer, joint senior partner at Baillie Gifford, says the fee cuts is part of a continued strategy of offering active management to investors at an attractive price whenever fund scale and ongoing costs allow.

Moreover, in recent months Baillie Gifford has also moved to cut charges in its investment trust stable. Scottish Mortgage’s shareholders received a fee reduction at the start of April, while Monks has also lowered its charges.

According to the Financial Conduct Authority’s (FCA’s) recent report on the asset management industry, active management fees have ‘remained broadly stable over the past ten years’. In the case of equity funds, regardless of size or style, most tend to display an OCF ranging between 0.85 per cent and 1 per cent.The FCA report was critical, making the point that ‘there is weak price competition in a number of areas of the asset management industry’.

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Telfer acknowledges that value for money is often taken for granted and challenges other active fund managers to follow suit in reducing fees. ‘Active managers should take the initiative in today’s environment. Value for money is an often neglected element of the fund buying process. Investors should be able to choose between passive and attractively priced active funds alongside considering the quality and future capability of active funds to deliver after-fees outperformance,’ he says.

‘All active funds are not the same. Sharing economies of scale with investors as funds grow is one way in which Baillie Gifford looks to deliver ongoing value for clients. Meeting all research costs internally is another. We believe that keeping costs low, maintaining high active share, low turnover and engaging with the management of companies in which we invest are key ingredients of a successful active manager.’ 

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