Fidelity Special Values trims investment fees

This Money Observer Rated Fund is moving to a new pricing structure, but could it have done more to reduce costs for investors?

Funds and Investment Trusts July 10, 2018 by Holly Black

Fidelity Special Values investment trust is moving to a tiered pricing structure. The £717 million investment trust, which is run by contrarian manager Alex Wright, will adopt a new pricing strategy from 1 September.

Currently investors in the trust pay an annual fee of 0.875 per cent. Under the new structure the annual charge will fall to 0.85 per cent on the first £700 million of assets under management. Assets over this amount will be charged at 0.75 per cent.

The company is also slashing its annual administration fee – which it pays for non-portfolio management services – from £600,000 to £100,000. In recent years, technological developments have brought back office and administration fees down across the industry, and Fidelity has now decided to pass these savings on to investors.

Fidelity estimates that that the changes will saver shareholders around 9.5 basis points in fees.

Andy Irvine, chairman of Fidelity Special Values, says it is ‘a useful saving for shareholders’.

However, Ben Yearsley, director at Shore Financial Planning, says: ‘While any reduction in fees is a positive for investors, this one does still seem high. I think Fidelity could have done more and lowered further. With £717 million of assets, the lower fee tier only just kicks in.’

Fidelity Special Values has been a Money Observer Rated Fund since 2013 – just a year after Wright took the helm.

The announcement is the latest in a line of investments funds and trusts reducing their fees or introducing fairer pricing structures

The idea behind a tiered pricing structure is that the operating costs of a fund or trust do not necessarily rise in line with their assets under management.

Most notable among trusts which have altered their fees are Scottish Mortgage, which moved to a tiered fee structure in March 2017, charging 0.3 per cent of the first £4 billion of assets under management and 0.25 per cent thereafter.

Also in the Baillie Gifford stable is Monks, which charges 0.45 per cent on the first £750 million of assets, falling to 0.33 per cent thereafter.

JPMorgan, Templeton and Schroders are among other firms which have changed their charging on some trusts in recent years.

Yearsley adds: ‘I’m in favour of tiered charging in general and it works very well in investment trusts, where managing a fixed pool of assets makes it easier to implement. Effectively investors get the benefit of the economies of scale. I wouldn’t be surprised to see more trusts follow suit.’

-Fidelity China Special Situations introduces benchmark-linked charges

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