International Advisers sister publication Portfolio Adviser can reveal that charges on Fidelity’s multi-asset Open range are set to drop between 0.03% and 0.33%, following the firm’s decision to ditch third-party funds for institutional-style segregated mandates.
The £664m ($853m, €739m) Fidelity Open World fund will see the most notable changes around fees, charging 1.25% instead of its current 1.58% for its N accumulation share class. The Multi Asset Open Strategic fund and Multi Asset Open Growth funds meanwhile will see the smallest change, with charges dropping just 0.03% and 0.07%.
| Fund | Current OCF | Revised OCF |
| Multi Asset Open Defensive | 1.33% | 1.15% |
| Multi Asset Open Strategic | 1.13% | 1.10% |
| Multi Asset Open Growth | 1.22% | 1.15% |
| Multi Asset Open Adventurous | 1.40% | 1.25% |
| Fidelity Open World | 1.58% | 1.25% |
Source: Fidelity International
Multi-asset chief information officer James Bateman said switching to a segregated structure, a project three years in the making, would enable the group to deliver even more value by leveraging Fidelity’s scale to deliver “institutional-style open architecture” to its traditionally retail client base.
Fidelity sub-funds
The move will see Fidelity unveil nine sub-funds, all structured as Irish Common Contractual funds. The asset manager has launched seven so far with the final two set to launch next month.
Bateman added that the multi-asset team would be able to access a wider investment universe and benefit from the ability to customise mandates.
The sub-funds will have between two and four third-party managers per mandate and will span the UK, Europe ex UK, global emerging markets, Japan, Asia Pacific ex Japan, North America and alternatives as well as high yield corporate debt and global aggregate bonds. Depending on client demand, the fund group said it would consider using the new funds elsewhere.
Fidelity said there will be no changes to its portfolio managers, Bill McQuaker and Nick Peters, who will continue to manage the Fidelity Multi Asset Open range and Fidelity Multi Asset range respectively.
Segregated mandates bandwagon
Fidelity is the latest mutual fund group to jump on the segregated mandate bandwagon. Brewin Dolphin similarly switched to a segregated structure earlier this year, joining the rank of firms including Quilter Investors and St James’s Place that offer these types of institutional mandates.
Ryan Hughes, head of active portfolios at AJ Bell, said gravitating toward a segregated mandate structure makes sense for firms like Fidelity which have a large amount of assets.
“It gives you more control in terms of specifying the mandate you want,” Hughes explained. “You might want a slightly tighter number of stocks or stricter sector limits or market cap limits, so you have a lot more control and flexibility around how you design how that investment works.”
Performance matters
Bella Caridade-Ferreira, chief executive of Fundscape, said she expects to see more investment groups gravitating toward segregated mandates in the future as they are an obvious tool for fund managers and distributors to cut costs and improve the situation for investors.
However whether investors end up getting a better deal will depend on performance, said Caridade-Ferreira. Whereas it is much easier to drop one or two funds in a fund-of-funds portfolio without disturbing the underlying assets, she noted this process is harder and can take “much, much longer” with segregated mandates.
“The issue I might have is what are they going to do about the pricing. If prices come down overall and the overall performance goes up, then that’s obviously a good outcome for everybody.”
