Woodford’s cheapest class demands ‘guaranteed distribution’

Cofunds has only been given access to the 0.75 per cent annual management charge for Neil Woodford’s new equity income fund, in spite it being the largest advised platform in the UK.

The platform will have the CF Woodford Equity Income fund available for investors from the beginning of the fund’s offer period on June 2.

But instead of the fund’s Z-share class, which charges an ultra-cheap 0.65 per cent annual fee, the platform only has access to the slightly more expensive option.

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“Cofunds is not presently offering the Z class as we are open architecture and Z class is currently only available to those offering guaranteed distribution. We allow advisers to choose what funds they want and cannot dictate which funds people choose,” a spokesperson said.

Broking giant Hargreaves Lansdown is understood to be still in discussions with Woodford Investment Management about which share class it will get.

However, the 0.75 per cent charge is still likely to be cheaper than rival funds, as Woodford Investment Management intends to incorporate all of the fund-related expenses that comprise the ‘ongoing charge’ into its annual charges.

The move to do this comes at a significant time, given the regulator last week condemned large parts of the fund management industry for poor practices when communicating fund charges.

The thematic review found some of the codes of practice on communicating charges were so bad the FCA forced some asset managers to take “remedial action” to fix the issues.

The regulator called on all fund managers to review its paper on charges and “review their arrangements accordingly”. The FCA reviewed 11 asset management firms from a variety of backgrounds, spanning independent asset managers to banks and insurers.

Mr Woodford’s former employer Invesco Perpetual recently moved to remove annual management charges from its funds and use just one figure – the fund management fee. The group’s head of sales Ian Trevers said the group had been working on its fee structure for roughly 18 months prior to its announcement.

Mr Trevers said the group did discuss its fee structure with the FCA but added it was “not in the nature [of the regulator] to say what is right and wrong in advance”.

“We started this a long time ago and did have conversations with [the FCA] as we went through the process,” he said. “It was a big leap of faith to go out there first with this. We were minded to take a lead position on this because we felt it was the right way to go.”

Mr Trevers added that he thought the FCA was “right” in the view that “annual management charges are very limited”, adding that the “industry needs to move on”.