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Fidelity scraps 'fulcrum' fees due to lack of interest

Fidelity scraps 'fulcrum' fees due to lack of interest

Fidelity International has scrapped the variable management fee share classes available to investors in its open-ended funds due to lack of interest. 

The VMF, also known as a 'fulcrum' fee, was introduced in July 2018 and was available across five active equity funds in Fidelity’s UK-domiciled Oeic fund range. 

The charges, whose arrival prompted a debate about active management charging models, gave investors the option of share classes whose fee would vary depending on the funds' performance. But investor interest remained limited throughout the fees' lifespan.

A spokesperson for Fidelity International told FTAdviser:  “We’ve seen limited client demand in our open-ended funds, and as a result we decided the UK-domiciled VMF share classes were too small to manage cost-effectively. 

“We continue, however, to see some clients in the institutional space who are open to variable fees linked to performance outcomes.

“Adoption of our model was always a client choice and we are pleased to see that it opened the doors to wider discussions on pricing structures.”

The fees varied depending on how the fund performed relative to its market index on an annualised three-year rolling period, after all costs and charges.

The variable scale had a maximum charge of 0.2 per cent above the regular annual management cost of 0.65 per cent, and a minimum of 0.2 per cent below that level - meaning the maximum and minimum fee levied would be 0.85 per cent and 0.45 per cent respectively.

The open-ended funds that offered this pricing structure were the Fidelity Special Situations, Fidelity European, Fidelity Asian Dividend, Fidelity Global Special Situations and Fidelity American funds.

From May 25, any investors in share classes using the variable management fee will be moved to the funds’ regular share classes.

Three of out Fidelity’s five investment trusts also adopted the variable management fee, and will continue to offer it.

sally.hickey@ft.com