M&G ups active management charge

M&G Investments is raising the annual management charge on its actively managed equity funds to 1.5%. The half-point fee increase will be offset by a reduction in the initial charge from 5% to 4%. The changes will affect 18 of the group’s Oeic funds.

M&G UK retail chief executive Gary Shaughnessy says: “We were just about the only ones left who hadn’t increased AMCs up to 1.5%. A number of cost factors have contributed to the decision.”

Shaughnessy explains that an increase in the costs of distribution, investment management and regulatory requirements has put pressure on fund management companies to raise fees. He acknowledges that the introduction of fund supermarket platforms has given investors wider access to funds, but this service comes at a cost and has put pressure on fund management companies’ margins.

“Regulation costs are the other key costs that have increased, both from Brussels and Canary Wharf. The intermediary market is also impacted by regulatory costs. We have reluctantly got to the point where it is the right thing to do,” explains Shaugnessy.

Fund management costs have also increased, he adds: “We have spent 6m on a performance and analytics system.”

M&G is one of a number of asset management groups to increase annual fees on its equity fund range recently. Other fund managers to push up charges in the past 12 months include Barings, Credit Suisse, Framlington, Invesco Perpetual and Threadneedle.

Shaughnessy says that with the trend of asset houses increasing AMCs on actively managed funds, the onus is on fund managers to deliver results.

“Our objective is to deliver exceptional performance net of charges. If you want cheap portfolios then use tracker funds. Active funds really have to be actively seeking outperformance to justify the higher fees. You need active fund managers that deliver performance consistently,” he argues.

Charges on the group’s bond and index-tracking portfolios remain unchanged, as do the fees for M&G’s Blue Chip, Managed, Managed Growth, and Fund of Investment Trusts portfolios. The AMC for the M&G Extra Income fund is only rising to 1.25%.

All changes are effective from September 19 and intermediaries and investors are being notified of the details.