M&G cuts fund prices – AJ Bell reaction

Ryan Hughes
17 June 2019

•        M&G rolls fund charges into simpler fee structure
•        Investors will see charges cut as fund size grows
•        Almost half of funds will see no reduction or less than 10 basis point cut

Ryan Hughes, head of active portfolios at investment platform AJ Bell, comments:

“Moving to a simple charging structure will make it easier for investors to know how much they will actually pay in fund costs each year. Most investors don’t know how much audit fees or share class hedging costs, they just want to know how much they will pay for the fund each year.

“The move to directly reduce fund prices as the fund grows, by 0.02% for every £1bn of assets up to a maximum of 0.12%, is a smart move but they could have gone even further. M&G’s funds can be quite expensive compared to similar funds and this move doesn’t change that. It still has administration costs higher than the best in the industry, particularly for its larger funds where historically it hasn’t shared the efficiencies of scale with customers. Investors also need to remember that the ‘one simple fee’ isn’t quite that, as transaction charges will be levied on top.

“At its highest, the pricing change will mean a 50 basis points cut for investors, but almost half of the share classes will see no reduction or less than 10 basis points knocked off the cost, so you need to check each fund to see if you’re winning from this move. 

“For example, The M&G Optimal Income and M&G Corporate Bond fund will see a 7 basis points drop in its annual charge, saving an investor with £10,000 in the fund £7 a year, while M&G Recovery will see its charge fall by 35 basis points, saving that same investor £35 a year.”

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