Axa Investment Managers has made light of the retail impact of Friends Life’s decision to pull £23.7bn of assets but says two funds may have to be “restructured” as a result.
Friends Life announced earlier this month that it is to switch a significant chunk of the £35.5bn in assets run for it by Axa to Aviva Investors – the first major switch since Aviva’s acquisition of Friends was completed in April.
The decision follows the insurer’s decision last year to switch mandates worth £14.5bn away from what was then F&C Asset Management, a move that saw seven F&C funds suffer outflows.
In a statement on the latest switch, however, Axa IM said the impact on its own range would be “confined to a small number of our onshore funds”.
“Having reviewed this specific group of funds we believe that only two of these, which are smaller longstanding onshore funds, may need some form of restructuring. However, no final decision has yet been made,” the fund house added.
Those two portfolios are defined by the group as having less than £50m in assets under management. Axa IM currently has six funds in its onshore range with assets below that level, according to FE Analytics.
The asset manager added it had been anticipating the move “for some time now”, saying the outflows had been factored into its strategic planning.
The spokesperson added: “We continually review our fund range to ensure that all of our funds are not only commercially viable, but more importantly continue to serve the best interests of our clients.”
Last year’s Friends Life redemption from F&C – now BMO Global Asset Management – had a significant impact on several of the group’s retail funds.
The F&C Global Bond fund, managed by Michiel de Bruin and Malika Gulabani, suffered the biggest single outflow, with assets plummeting from £724.3m in January to £19.6m in March.
Other funds hit by the outflows included the F&C UK Equity Income, F&C UK Smaller Companies and F&C Responsible UK Equity Growth funds.
A trio of institutional funds listed in Investment Association sectors were also hit, with the F&C Institutional UK Smaller Companies fund plummeting from £132.2m in size to a mere £2,000 by March. BMO Global Asset Management has confirmed this fund has since been closed.
Left untouched, investors in the other affected portfolios could face higher ongoing charges, given smaller funds have higher fees as a percentage of assets. But this could be mitigated by a reduction in fixed expenses.
Investors in the funds will also not be burdened by the trading costs usually associated with shrinking fund sizes.
This is because assets are being transferred to another provider, avoiding the need for managers to sell out of positions in order to meet cash redemptions.
Axa IM expects that the £23.7bn withdrawal from its own mandates, made up of equity, fixed income, property and multi-asset mandates, will be completed by the end of 2015.
It will continue to run global, US, Asia Pacific, Japanese and emerging market equity funds for Friends Life.
