AJ Bell passes fund cost savings back to investors

AJ Bell has reduced the price investors pay for its Passive Balanced fund by 6% as part of a wider commitment to passing economies of scale back to investors as it grows its fund business.
5 June 2018

AJ Bell has fixed the Annual Management Charge (AMC) on its range of six passive, multi-asset funds at 0.15%.  Fund running costs and the costs of the underlying investments are added to this AMC to create the Ongoing Charges Figure (OCF) of the funds.

As the funds increase in size, the fixed costs associated with running the fund will decrease proportionately.  This will mean a lower OCF and as AJ Bell will never receive more than the 0.15% AMC, the direct benefits of scale will benefit customers, rather than AJ Bell. 

In addition to passing on economies of scale to customers, AJ Bell is aiming to reduce the costs of the underlying investments through discussions with suppliers, with these cost reductions also passed back to investors.

The first beneficiary of this pricing structure is the AJ Bell Passive Balanced fund which has seen its OCF reduce from 0.50% to 0.47%, a cost reduction of 6%.  The other five funds in the range will adopt the same approach as they increase in size.

Kevin Doran, chief investment officer at AJ Bell, comments:

“The FCA’s Asset Management Market Study didn’t pull any punches in identifying weak price competition in the market and specifically highlighted the fact that as fund size increases, it is fund groups that benefit from economies of scale, rather than investors.

“One of our goals as a business is to drive down costs for our customers.  By fixing our AMC at 0.15% and committing to never receiving more than that, all cost savings we can generate through economies of scale or lower underlying investment costs, will automatically benefit our customers in the form of a lower overall price for the funds.”

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