M&G and Vanguard cut fees for active funds

The new cuts mean that most of Vanguard’s active fund range now charge less than 50 basis points.

Funds and Investment Trusts June 19, 2019 by Tom Bailey

Two fund management giants have announced fee cuts for fund investors.

First up, earlier this week M&G (17 June), said that it will be introducing “discounts” to its larger funds, those with assets of more than £1 billion, to pass on savings from economies of scale.

The move is a welcome one, as most other open-ended funds fail to reduce fund fees as assets grow. But the fee reductions start off very small, at 0.02%, before rising to 0.12% for funds with assets over £6 billion.  

A spokesperson for M&G said having listened to customer feedback, it had decided to simplifying its fund charges.

The spokesperson added: “We are combining all the charges that make up the current Ongoing Charge Figure (OCF) into a single annual charge from 1 August 2019 (excluding extraordinary expenses, such as legal or tax fees, and transaction costs). In addition to this, we have reviewed the pricing across the fund range and we are introducing discounts to our larger funds to pass on potential savings from economies of scale.”

Separately, Vanguard today (19 June) announced fee cuts for its UK domiciled active fund range.

The management fee for Vanguard Global Equity, Vanguard Global Equity Income and Vanguard Global Balanced Fund will be cut to 0.48% from 0.6%.

Meanwhile, Vanguard’s Global Emerging Market Fund fee will slightly decrease to 0.78%, from 0.8%.

The new cuts mean that most of Vanguard’s active fund range now charge less than 50 basis points. That’s not far from what investors might expect to pay for many index funds, save for the absolute cheapest (many of which are provided by Vanguard) or the new US-only trackers offering zero to negative fees.

Commenting on the fee reductions Robyn Laidlaw, head of UK Distribution for Vanguard, says: Vanguard’s active funds aim to provide stability, experience and a focus on long-term, low-cost investing to give investors the best chance of investment success.

Vanguard is more famous for its index tracking funds, which the company pioneered in the 1970s under its late founder, Jack Bogle. 

However, as Laidlaw notes: “Active management has been a part of Vanguard’s approach since our founding in 1975.”

While the asset manager has seen a huge rise in its assets under management thanks to the growing popularity of index funds, the company has still manged to attract over £1 trillion for its active strategies.

Indeed, Bogle’s argument for index funds was primarily about fees. Unlike other key figures in the popularisation of passive investment strategies, Bogle was less concerned about whether or it was possible for stock pickers to beat the market, but more about how to stop high fees and charges eating into investor returns.

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