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'Don't give away alpha': Fidelity stands firm on fund pricing
by Robert St George on Oct 22, 2013 at 07:42
Fidelity Worldwide Investment will not be cowed into slashing its fund prices to secure preferential treatment from other platforms, according to Hugh Mullan, the group’s UK managing director.
Fidelity has not been one of the eight asset managers – Old Mutual, Cazenove, Schroders, Henderson, Threadneedle, Neptune, Investec and Standard Life Investments – to declare that they will offer ‘super clean’ share classes to Standard Life’s distribution platform.
While Fidelity is seeking access to the same terms for its own platform, Mullan (pictured) is also responsible for Fidelity’s own suite of funds and he is conscious of the need to protect margins on them.
‘I don’t want to give away the managers’ quality and Fidelity’s depth of expertise,’ he told Wealth Manager. ‘I don’t want a commoditised product.’
While Fidelity offers relatively niche funds from star managers such as Citywire AAA-rated Alex Wright, it also has multi-billion-pound core products headed by the likes of Ian Spreadbury in more keenly priced sectors.
Mullan confirmed that he had no interest in racing to the bottom of the pricing spectrum with such funds. ‘Ian Spreadbury is a very high quality manager and we shouldn’t treat him as a commodity,’ he commented. ‘If it’s just a price-based discussion, people will fail to see the value. We would encourage people not to give away alpha.’
Equally, Mullan was sanguine about the prospect of this stance risking Fidelity’s products being excluded from other platforms. ‘We’re comfortable if the funds don’t end up in some of the restricted ranges from distributors,’ he stated. ‘You have to have confidence in your own product.’
On the subject of platforms, Mullan argued that while the pressures on asset managers to lower prices may be beneficial to fund buyers, the same forces are handing platforms too much control over the industry.
Cofunds recently became the latest to write to fund groups to demand access to whatever fee deals they struck with other platforms.
Mullan appreciated the advantages such moves wrought insofar as they lowered costs, but expressed concern about the implications of the trend. ‘It may be uncompetitive if it concentrates power with distributors,’ he explained.
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