EquitiesMay 16 2013

Rlam switches two funds to passive, removes trail

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ByMichael Trudeau

Royal London Asset Management has converted two Asian funds from active to passive, abolishing trail commission in the process.

From 25 March 2013, the RL Japan Growth Fund relaunched as the RL Japan Tracker Fund, and from 22 April the RL Far East Fund relaunched as the RL Far East Tracker Fund.

Each fund previously carried an annual management charge of 1 per cent, which included 0.5 per cent of adviser commission. Now, the AMC has fallen to 0.2 per cent. An initial 3.5 per cent charge for new investments on the funds has been completely removed.

Total cost of investing to clients will fall by less than this apparent 0.8 per cent if they use an adviser and invest via a platform.

Documents seen by FTAdviser relating to an investment in the Japan fund via Fundsnetwork put the total cost of investing as being just 5bps lower than the previous 1 per cent bundled charge when a 0.5 per cent adviser charge and 0.25 per cent platform charge are included.

When asked why the switch from active to passive brought costs of investing down by only 5bps, a spokesperson for RL said the actively managed funds had already been “competitively priced”.

Clients will be automatically switched to the new fund if they have not instructed otherwise by 11am on 10 June 2013. This means advisers stand to lose the commission previously paid by these funds.

If clients wish to switch out of the funds they can do so free of charge. Advisers will not automatically receive a fee from these funds, so must contact clients and agree a fee individually.

The spokesperson added that the switch does not represent part of a larger move towards passives by the firm.

He said: “We took the view that whilst we are committed to actively manage equity products those are the areas where we can have a differentiated offering and a competitive advantage.

“We had small teams managing Asian funds out of London offices, so we just weren’t in a position to maintain a competitive edge compared to our peers.”