Fidelity to add trail-free shares for discretionaries

Fidelity is to launch share classes targeted at discretionary managers on several funds, levying flat fees of 0.75 per cent a year and containing no rebates.

The share classes will be free of trail commission and platform rebates - both of which are loaded into the 1.5 per cent share classes common among funds now.

The group said the new share classes, set to launch throughout the second half of this year, come on the back of demand from discretionary managers for post-RDR share classes for some of its funds and will carry a £500,000 minimum investment.

The share classes will not be available on retail platforms.

Ben Waterhouse, head of UK retail sales at Fidelity, said the group has not yet launched 75 basis point retail share classes for its funds because of an “absence of clarity from the regulator” surrounding rebates.

Mr Waterhouse said the group’s 1.5 per cent share classes and 1 per cent Y share classes for fee-based advisers who use platforms will cater for existing demand.

He said the group is RDR ready and would make any necessary changes when firm rules about rebates are in place.

“From January 1 2013, when RDR one happens, our existing share classes can meet demand,” he added.

“If there is a subsequent change and rebates are banned we will have to make a decision about whether to make the 75 basis point share classes available to the broader space.”

Mr Waterhouse said third party platforms are looking to build the capability to reinvest rebates, meaning share classes at 1 per cent from fund groups may still be used post-2014.

The FSA late last month proposed a ban on all payments from fund providers to platforms, starting January 1 2014, but under provisions for legacy assets – in other words, business struck before 2014 – the platforms will be able to receive ongoing rebates on business sold before that date. It is expected to make a final ruling on the matter later this year.