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Assessment of value rules cause Aviva to cut fund prices

Assessment of value rules cause Aviva to cut fund prices

Aviva Investors has cut the fees on a range of active and passive funds as a result of the Financial Conduct Authority’s (FCA) requirement that fund houses show their products are value for money.

Aviva cut the fees on five funds, two passives - the International Index Tracker and the UK Index Tracker - and three actives.

The two passive funds have cut their fees, depending on the share class, by as much as 11 basis points on the international tracker, to three basis points on the UK tracker. 

The active funds are all cutting the fees on the different share classes by 5 basis points. They include the £268m Global Equity Endurance fund, the £230m Global Equity Income fund, and the £261m Monthly Income Plus fund.  

The Global Equity Endurance fund has returned 34 per cent over the past three years, compared with 23 per cent for the average fund in the IA Global Sector, while the Global Equity Income fund has returned 27 per cent in one year, compared with a 16 per cent average in the IA Global sector in that period. 

The Monthly Income fund has returned 24 per cent over the past five years, compared with 22 per cent for the average  fund in the IA Sterling Corporate Bond sector in the same time period.  

A representative of the company said the fee cuts were a direct result of the Assessment of Value regulations. 

Aviva's assessment of value report is one of the first to be published by an asset manager since the new Financial Conduct Authority rules mandating the reports have been implemented.

As part of the regulator’s asset management review, fund houses are now required to carry out an annual assessment of whether the firm provides value for its clients.

The assessment criteria set out by the FCA include performance, general costs, economies of scale, comparable market rates, comparable services and share classes.

At what point asset managers are required to publish their reports depends on their financial reporting dates, but most will be publishing their first assessment review throughout 2020.

FTAdviser understands the fee cuts for some of the Aviva funds come following action from the non-executive directors of the individual funds.

The appointment of such non-executive directors is another regulatory requirement.

Hargreaves Lansdown and Vanguard both recently published the statements of value for their respective funds, with Hargreaves stating it believes the fees on its range of multi-manager funds represent good value despite a sustained period of underperformance in the portfolios and high fees.

david.thorpe@ft.com

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