M&G fund fee cut 'could have gone further'

M&G fund fee cut 'could have gone further'

M&G's new fund pricing has failed to make the products more competitive for many investors, according to Ryan Hughes, head of active portfolios at AJ Bell.

M&G, the fund group owned by Prudential, announced it has changed the pricing structure for its fund range, with investors in a dozen of the company’s funds to see a cut immediately, and all funds reverting to having a single published charge.

Under the new structure fees are falling by 0.02 per cent for every £1bn of assets in the funds.

The twelve funds that will carry a lower charge immediately are the M&G Global Dividend fund, M&G Dividend fund, M&G Recovery fund, M&G Global Themes fund, M&G Global Macro Bond fund, M&G UK Inflation Linked Corporate Bond fund, M&G Global High Yield Bond fund, M&G Corporate Bond fund, M&G Optimal Income fund, M&G Strategic Corporate Bond fund, M&G Property Portfolio and M&G Feeder Property Portfolio.

A representative of M&G said: "Having listened to customer feedback, we are simplifying the way we charge for our funds so that our costs and charges are easier to understand and more predictable.

"We are combining all the charges that make up the current Ongoing Charge Figure (OCF) into a single annual charge from 1 August 2019 (excluding extraordinary expenses (legal or tax fees), transaction costs).

"In addition to this, we have reviewed the pricing across the OEIC range and we are introducing discounts to our larger funds to pass on potential savings from economies of scale."

But Mr Hughes said the actual savings were meagre for many investors.

At its highest, the pricing change will mean a 50 basis points cut for investors, but almost half of the share classes will see no reduction or less than 10 basis points knocked off the cost, he said.

For example, The M&G Optimal Income and M&G Corporate Bond fund will see a 7 basis points drop in its annual charge, saving an investor with £10,000 in the fund £7 a year, while M&G Recovery will see its charge fall by 35 basis points, saving that same investor £35 a year.

Mr Hughes said: "The move to directly reduce fund prices as the fund grows, by 0.02 per cent for every £1bn of assets up to a maximum of 0.12 per cent, is a smart move but they could have gone even further.

"M&G’s funds can be quite expensive compared to similar funds and this move doesn’t change that. It still has administration costs higher than the best in the industry, particularly for its larger funds where historically it hasn’t shared the efficiencies of scale with customers.

"Investors also need to remember that the ‘one simple fee’ isn’t quite that, as transaction charges will be levied on top."