Old Mutual Global Investors (OMGI) is overhauling two of its Generation funds in order to manage them ‘more flexibly’ in light of the pension reforms.
OMGI had told Investment Adviser in May it was looking to make changes to the range, especially with regards to the “confusing names”, in the face of low inflows in the three years since the launch of the funds.
From October 1 the Old Mutual Generation Target 3:4 and 4:4 funds will be renamed, lose their explicit income targets and see an annual management charge (AMC) increase, although the ongoing charge (OCF) will fall.
OMGI will also adjust the funds’ investment capabilities so the managers can directly invest in income-generating stocks, and will “fully utilise a wider range of potential investments” rather than predominantly using third party managers.
The other two funds in the range, Generation Target 3:6 and 4:6 will not be overhauled as yet, but OMGI said it was currently reviewing whether to make similar changes.
The funds’ shift into direct investing means there will be “increased work for our in-house management teams but reduced out-sourced costs,” the firm said.
This will prompt an increase in AMC but a reduction in the OCF so it will result in a slight overall cost reduction.
Given the removal of the income target, the Generation funds 3:4 and 4:4 will be renamed Old Mutual Generation Target 3 and Old Mutual Generation Target 4 respectively.
Previously, the second number in the name had referred to the target level of income.
In spite of the income target removal, OMGI said the funds would still look to generate an income, as well as deliver capital growth for investors.
“Old Mutual Global Investors believe the changes are in the best interests of investors, not least because they will allow the funds to be managed more flexibly in accordance with the recent pension reforms,” a spokesperson said.
Investors now have more access to their pension pots following the scrapping of annuities, with many favouring multi-asset products because of their ability to generate income while preserving capital.
The spokesperson added there was no proposed change to the risk profile of the funds.
