Investors in some of M&G's biggest open-ended funds face increased fees because of its decision to split them ahead of Brexit.
M&G has announced it will shift £34bn of assets out of the UK because of its departure from the European Union.
European investors in the 21 funds will be shifted into a mirror fund in Luxembourg, while UK investors will remain in the existing funds.
But UK investors remaining in the M&G funds will face higher charges, which the company said should not exceed 2 basis points a year.
An M&G spokesman said: "Our analysis shows that investors would not experience a greater than 2bps increase in OCFs as a result of the non-GBP share classes transferring to Luxembourg SICAVs.
"For example, an investment of £1,000 in the M&G Global Dividend Fund GBP A Acc would cost an investor £16.61 in charges today (per annum) and £16.62 (due to roundings – less than a penny difference) in charges post the merger."
Among the funds affected is the UK's largest open to financial advisers, the £23bn M&G Optimal Income fund managed by Richard Woolnough, which after the split will lose this title to Fundsmith Equity.
To facilitate the split investors will be suspended from dealing in the funds on either side of a particular weekend.
The work is happening in four phases with the first group of funds, comprising the M&G Asian, M&G Episode Macro, M&G Global Emerging Markets, M&G Global Macro Bond, M&G Japan, M&G Japan Smaller Companies, and M&G Short Dated Corporate Bond funds unable to buy or sell this coming Friday (26 October) or Monday (29 October.)
Three funds are closing to UK investors as they will too small to be sustainable once the split happens and these are the M&G European Strategic Value Fund, M&G Pan European Dividend Fund and the M&G Global Corporate Bond Fund. Investors in those funds will be offered the chance to switch into other M&G funds for no charge.
An M&G spokesman said: "M&G is working to protect the interests of its clients in the UK and abroad who wish to remain invested in M&G’s fund strategies after the UK leaves the EU, regardless of the outcome of the Brexit negotiations.
"As communicated to our clients, 21 funds will be split, with assets held by non-UK investors merged into equivalent Luxembourg funds over the next six months.
"Each series of mergers is scheduled to take place over a weekend, with the funds being suspended for a day on either side of the weekend. We have been consulting and working with the fund platforms to ensure this process is handled with the minimum of disruption to intermediaries and underlying clients."
Adrian Lowcock, director of personal investing at Willis Owen, said: "The only real downside for a UK investor in these funds is that the change means the funds will be significantly smaller, and it maybe the way the funds invest, they would be less effective if smaller in size. On the issue of charges, it sounds like M&G are just passing on costs rather than trying to profit from this, but no one likes to see fees go up."
| Funds being split by M&G |
| M&G Asian |
| M&G Episode Macro |
| M&G Global Emerging Markets |
| M&G Global Macro Bond |
| M&G Japan |
| M&G Japan Smaller Companies |
| M&G Short Dated Corporate Bond |
| M&G European Corporate Bond |
| M&G Global Convertibles |
| M&G Global High Yield Bond |
| M&G Global Select |
| M&G North American Dividend |
| M&G North American Value |
| M&G Pan European Select |
| M&G Emerging Markets Bond |
| M&G Global Dividend |
| M&G Global Floating Rate High Yield |
| M&G European Strategic Value |
| M&G Pan European Dividend |
| M&G Global Corporate Bond |
| M&G Optimal Income |
david.thorpe@ft.com
