Allianz GI shuts tracker fund as passive price war bites

Allianz GI shuts tracker fund as passive price war bites

Allianz Global Investors is to shut its £17m UK Tracker fund, its only UK passive offering, after it fell victim to an ongoing price war between other providers.

The insurer-owned asset manager said the passive fund's charging structure and size has made it "no longer commercially viable".

It tracks the FTSE All-Share but, unlike other providers, charges investors an annual management charge of 0.5 per cent with an ongoing charges figure (OCF) of 0.77 per cent.

In comparison, an ongoing price war between providers such as BlackRock, Vanguard, Fidelity and HSBC Global Asset Management has seen equivalent products with OCFs as low as 0.06 per cent.

Allianz said due to the fund's small size and the gulf between its "relatively high" fees and those of other providers, it expected remaining investors - all of which are retail - to redeem and move to more competitively priced products, placing further pressure on the OCF.

The fund will now close on June 30 with funds being liquidated if investors do not take action beforehand.

A letter to investors said: "We believe the fund is likely to face challenges and outflows in the future, as shareholders look to move to more competitive funds. Consequently, the OCF is likely to increase further making the fund even more expensive for investors."

The asset manager suggested the closure would mean it now bows out of the UK passives market altogether, given it would not be able to build up the scale needed to offers charges as low as its rivals. BlackRock's equivalent fund has £10bn in assets and Vanguard's £5.8bn.

"We have considered whether it would be appropriate to merge the fund by way of a scheme of arrangement with another of our funds. However, all of our funds are actively managed and in our opinion, there are no directly comparable funds in our current range," the letter added.

An Allianz Global Investors spokesperson said: “Our mission is to generate alpha for clients not to replicate an index, hence our decision to close this small, legacy product."