Hermes fund soft-closes, M&G outflows and BlackRock cuts fees: Your fund news digest
14 March 2015
FE Trustnet rounds up the news that has been flying around the asset management industry over the past week, including big cost reductions in a major ETF and why Mark Carney thinks it would be “foolish” to cut interest rates.
But plenty more has happened in the fund management world, of course, including a range of news stories that you might have missed. In a new weekend format, we round-up some of the news that broke this week in an easily-digestible article.
Carney: Rate rise would be “foolish”
The one thing every investor is watching at the moment is interest rates and this week Mark Carney offered some reassurance to those worried that the Bank of England is poised to lift the base rate to fight low inflation.
The governor said it would be “extremely foolish” for the Bank to cut rates for this reason, noting that the UK’s recent falls in inflation were driven by the low oil price. Carney expects inflation to hover around zero for most of the year, before moving back towards the official 2 per cent target without the aid of looser monetary policy.
“The impact of that extra stimulus ... would happen well after the oil price fall had moved through the economy and we would just add unnecessary volatility to inflation. That would be foolish," he said before the House of Lords economic affairs committee.
M&G UK retail outflows deepen
Looking more closely at the funds industry and M&G put out its 2014 annual results, showing a 13 per cent increase in profit and an 11 per cent rise in assets under management to £74.3bn. The Prudential-owned business also witnessed net inflows of £6.7bn, down slightly from the £7.3bn posted in 2013.
However, M&G’s retail sales in the UK suffered £1.7bn in net outflows – more than the £700m outflow of the previous year. Better news came from FE Alpha Manager Richard Woolnough’s £25bn Optimal Income fund, which has become the best selling cross-border fund in Europe.
Performance of fund vs sector over 3yrs
Source: FE Analytics
There was also the big news that Prudential chief executive Tidjane Thiam has been named as the new head of Credit Suisse. Thiam had been head of the FTSE 100-listed group since 2009 and spearheaded its move to diversify away from its UK life insurance business – partly through the expansion of its M&G asset management arm.
Trevers leaves Invesco Perpetual after 20 years
Another of the UK’s asset management powerhouses was in the headlines this week, with the news that Invesco Perpetual head of UK retail Ian Trevers has resigned after two decades at the business. He joined the group in 1993 as a management account, became Invesco UK’s chief operating officer in 2003 and head of distribution in 2006.
Invesco Perpetual chief executive Mark Armour said: “Ian has made a significant contribution to the success of our business over the last 20 years. We are deeply appreciative of all he has done and he leaves with our thanks and best wishes for the future.”
The group has also created two new key roles, promoting Douglas Sharp from head of cross-border strategy and EMEA to head of retail for EMEA and hiring Fidelity’s Colin Fitzgerald as head of institutional for EMEA.
Hermes to soft close Pines’ Asia ex-Japan fund
Jonathan Pines’ Hermes Asia ex-Japan Equity fund has been the best performing portfolio in the IA Asia ex Japan sector since its launch in November 2012, returning 59.06 per cent. This has caught the attention of investors and the fund has swelled to $1.5bn in size.
Performance of fund vs sector and index since launch
Source: FE Analytics
This week, Hermes contacted clients to alert them that they would be restricting investment in the fund from 11 May as the portfolio is “nearing capacity”. Furthermore, new investors will not be able to access the fund from this date.
The group said: “By setting this constraint, their objective is to ensure that capacity concerns do not compromise Jonathan's ability to continue generating outperformance.”
Pines takes a different approach to most of his peers and focuses purely on value, not quality growth. This means that very few, if any, funds can stand in as a direct replacement for it but FE Trustnet did take a look at three Asian equity funds that the experts are backing.
BlackRock slashes fees on UK passives
BlackRock has cut the price of two iShares UK equities funds in a renewed drive to boost investor interest in exchange traded funds (ETFs).
The price of distribution units in the iShares FTSE 100 UCITS ETF, which is its flagship product and was the first ETF to list on the London Stock Exchange in April 2000, has been cut by 40 basis points to 0.07 per cent.
Meanwhile, accumulating units in the iShares Core FTSE 100 UCITS ETF has been brought down from 0.10 per cent to 0.07 per cent.
Fergus Slinger, head of UK sales at iShares, said: “As the FTSE 100 hits record highs, the price of investing in it is falling.”
“The ETF market throughout Europe is growing hugely, and today’s changes are about ensuring the demand UK investors have for ETFs is met with the right products at the right price.”
Aberdeen unveils China A share fund
Aberdeen Asset Management is to launch a high conviction fund that focus on companies listed in mainland China with a long-term view.
The Luxembourg-domiciled Aberdeen Global China A Share Equity fund, which launches on 16 March, will build a portfolio of 25 to 30 companies, out of an investible universe of some 2,000 companies listed in Shanghai and Shenzhen.
Chinese mainland listed companies tend to have a weaker reputation than their peers listed in Hong Kong, owing to issues such as lack of transparency, but Aberdeen believes that over time more market-based pricing, competition and investor transparency should evolve in this sphere.
Nicholas Yeo, head of Chinese equities at Aberdeen, said: “With this fund we are not saying now is the right time to buy the market, but asking investors to consider China as a long-term proposition – one, furthermore, we have been working on indirectly for many years through the build-up of our team and mainland research. China may be a massive country but it is very much an emerging market that demands discipline and patience.”
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