Aon has launched a Dublin- based Oeic, which it plans to offer to retail investors within 12 to 18 ...
Aon has launched a Dublin- based Oeic, which it plans to offer to retail investors within 12 to 18 months.
Aon Investment Company funds will be offered first to institutional investors in the UK from mid September, subject to FSA approval. However, marketing will be rolled out to the retail community within the next year and a half.
The oeic, which has a minimum investment of £20,000, is made up of six sub-funds ' UK equity, US equity, North American equity, Japan equity, Pacific ex-Japan equity and a sterling corporate bond fund. Each is managed on an outsourcing basis with four managers advising on the UK equity fund and two on each of the other funds.
The equity funds aim to beat the market index by 1.5% after fees. The corporate bond fund aims to beat the market index by 0.75% after fees.
The management fees on the funds are: UK equity 0.55%; US and Europe 0.6%; Japan 0.65%; Pacific ex-Japan 0.7%; and corporate bond 0.3%, with a performance fee of 10%.
When the funds are targeted at the retail market, performance objectives and fees are likely to be higher.
The performance fee is capped at 2% on all funds in order to cancel the risk of fund managers taking excessive risks to increase their performance fees, according to Garvey. There will still be scope for managers to take risks because of the product's structure, he added.
The funds will run with a tracking error of between 3.5% to 6%. According to Garvey, the structure of the fund will allow managers to take more risky bets than this might suggest. Because the managers are specialists in different areas it is likely risks taken by one will be cancelled out by another, thereby balancing the fund, he said.
There are 14 specialist managers on the funds, hired externally. Aon keeps the fees low by critical mass, according to Garvey.
The managers are willing to accept lower fees because they are taking a larger volume of assets under management, he said. Aon takes care of client servicing for a fee and the managers take on one investment.
Dublin was chosen for the fund because it is seen as a centre of excellence for this type of vehicle, according to Garvey. There is a wealth of professional, qualified and accessible labour there, and it is a flexible location from where the fund can be sold worldwide, except for the US, he said.
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