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Can Aberdeen Standard drag Virgin funds back on track?

Virgin Money has long faced criticism for the 1% charge attached to its tracker funds. Can its new tie-up change that?

 
Can Aberdeen Standard drag Virgin funds back on track?
 

Virgin Money's range of tracker funds, routinely the target of criticism over their high charges, are set for a shake-up after Aberdeen Standard Investments agreed to acquire a stake in the challenger bank's fund business.

Aberdeen Standard will pay more than £40 million for a 50% stake in Virgin Money's funds business, which runs £3.7 billion across six funds for over 200,000 customers, in a deal expected to complete by the end of the year.

The most notorious of these, and the largest, is the Virgin UK FTSE All-Share fund, which still houses £2.8 billion of assets despite longstanding criticism of its 1% charge.

As a 'tracker' fund, it aims to replicate the performance of an index, in this case the FTSE All-Share. Charges attached to funds like this have tumbled in recent years, amid a price war among passive investment providers. The iShares UK Equity index, for example, which tracks the same index, costs 0.06%.

Virgin's range of tracker funds appear immune to this trend, however. Its other four passive funds, covering bonds, global shares and mixes of those assets, also cost 1%. All five of the funds are run by State Street Global Advisors, which offers a FTSE All-Share exchange-traded fund carrying a charge of 0.2%.

The Virgin Climate Change fund meanwhile carries a 1.3% charge and is actively managed by fund group GLG.

Under the tie-up with Aberdeen Standard Investments, management of the funds is likely to be moved to the group.

Aberdeen Standard has plenty of experience in running tracker funds, having run £109 billion of Scottish Widows clients' pension investments this way, before losing the contract last month.

But if the existing Virgin funds continue to be run in this way, the issue of charging is likely to be high up the agenda following the tie-up.

'It's something that we'll look at,' said a Virgin Money spokesman, adding that the new deal provided 'a significant opportunity to transform the Virgin Money proposition'.

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