Group will outsource management of three products to be unveiled in January
M&G is to launch three unfettered funds of funds in the first week of January, outsourcing the management to a third party.
The group is still in negotiations with two fund management houses to run its range of multi-manager funds, which will start off with UK Growth, Growth and Balanced portfolios. More options will be added at a later date. M&G currently runs two fettered funds of funds but does not believe it has the expertise to manage unfettered products.
The group has yet to decide the format of its range, whether it should be a manager of manager or fund of funds approach, but is leaning towards the latter, which it believes is more flexible.
Phil Wagstaff, managing director, retail at M&G, said the key to its arrangement with any third party will be exclusivity and the reliance on a team of managers rather than a star individual.
The group is still considering whether it will rebate the annual management charge on M&G funds if they are included in the portfolios, he added. 'Whether they want to buy our products or not will be entirely at the discretion of the managers,' said Wagstaff.
Meanwhile, M&G is in the process of refining the charging structure on its bond and equity funds following their conversion from unit trusts to Oeics.
Under the changes, M&G bond funds will offer both initial and trail commission to intermediaries for the first time.
For unwrapped investments into its £1.29bn Corporate Bond fund, M&G is offering a 3% initial charge, 3% commission and no trail. On direct investments into its £871m High Yield Corporate bond fund, there will be a 3% initial charge, 3% commission and, for the first time, 0.5% trail.
For Pep and Isa business, M&G offers the choice of a 3% initial fee, with 3% commission and 0.5% trail, for both bond portfolios, although this is only available through Cofunds. The option of going direct to M&G and paying no initial charge but still receiving 3% commission is available. On this option, no trail is available on either fund.
For equity funds, the existing charging structure remains unchanged, with the fees for unwrapped business at 5% initial, intermediary commission at 3% and, in most instances, no trail. The current Pep and Isa pricing structure also remains, featuring a 5% initial charge, 3% commission and 0.5% trail.
The group has introduced what is being called an X class, a share class with no initial charge but a decreasing exit penalty.
There will be no initial charge on M&G's equity funds via this share class but the annual management charge has been raised by 0.5% to 1.5% per year. Intermediary commission will be 3%, with no trail.
The no initial charge funds also have a withdrawal fee, which reduces to 0% after five years. All the changes are effective as of 1 October.
The group is still considering whether to use a traditional pricing model on its fund of funds offering or also offer the X share class option.
Has run Cautious Managed fund since 2011
What’s right – not what sells
Richards fires back at committee report
Available on Investcentre platform
Invested from 2006-2011