There was a wave of investment trust announcements this month: with new listings, changes to dividend policies, and a number of fee reductions on leading trusts. Elsewhere many fund managers are still digesting the wide-ranging industry reforms proposed by the Financial Conduct Authority at the end of June. The FCA published further details about its related review of fund supermarkets and platforms.
Watchdog Investigates Fund Platforms
The FCA has set out the terms of its investigation into fund platforms and supermarkets – announced as part of last month’s review into the asset management industry. This market study will focus on whether the platforms — which have grown exponentially in recent years – offer consumers value for money.
This ‘broad scope’ investigation will also look at wealth managers, bank and life companies, as well as more online fund platforms.
As part of this investigation the FCA will look at whether the model portfolios offered by many platforms meet investors’ objectives and offer the most competitive prices.
It said it will also look at the increasing ‘vertical integration’ of platform services, which has seen commercial deals arising between platform providers, asset managers and financial advisers. The FCA said it wanted to investigate whether such arrangements distorted competition in the market, to the disadvantage of consumers. If the FCA finds competition is not working well, it may intervene to promote more effective competition.
Aberdeen Emerging Markets Trust Cuts Fees
Aberdeen Emerging Markets Trust (AEMC) is the latest investment trust to cut annual management charges. From November 1, these will fall from 1% to 0.8% of net assets. This will lower the company’s ongoing charge ratio, which at 1.1% is already one of the lowest in its peer group.
At the same time, the board of Aberdeen Emerging Markets Trust announced that it would be amending its dividend policy. It said it will start making dividend payments from a combination of income and capital. Historically this trust has not paid distributions to shareholders.
The first dividend payment will be declared in August, with the intention being that these will be paid quarterly. The board said that the total dividend for the next financial year is expected to be no less than 20p per share.
JPM Reduces Fees on US Trust
The £1 billion JP Morgan American Investment Trust (JAM) is to introduce a tiered charging structure from October 1, which will result in fees being cut by more than a third.
The Bronze Rated trust, which is co-managed by Garrett Fish and Eytan Shapiro, currently charges a 0.52% fee. This be cut to 0.35% on the first £500 million of assets, then 0.3% for assets up to £1 billion, then 0.25% for assets over £1 billion. On the current assets under management this would give an effective management charge of 0.33%.
Dr Kevin Carter, chair of the board of JP Morgan American, said this changed allowed the company to retain its competitive position against ETF and other smart-beta products while continuing to pursue a core active management strategy.
Invesco Perpetual Reduces Fees
Invesco Perpetual has also cuts fees on two of its investment trust fees: Invesco Perpetual Select Trust UK Equity (IVPU) and Invesco Perpetual Select Trust Global Equity Income (IVPG). The annual management charges on these trusts have been cut from 0.65% to 0.55% a year and the performance fee has been reduced from 0.65% to 0.55% or net assets.
Doors Close on Ethical Fund
Royal London Asset Management will close its UK Ethical Fund at the end of August this year. The asset management group said the decision to close this fund – which was only launched in 2011 – will allow the manager Mike Fox to concentrate on the firm’s Bronze-Rated Sustainable Leaders Trust, which has some £563 million assets under management.
Those invested in this fund will have the option to transfer into Sustainable Leaders Trust or to transfer into another RLAM fund.
The Sustainable Leaders fund has a four-star performance rating from Morningstar analysts, compared to the two-star rating given to the UK Ethical Fund.
Change to Dividend on Martin Currie Trust
Shareholders in Martin Currie Asia Unconstrained Trust (MCP) have voted to increase the dividend by having a 'distribution from capital' introduced on the trust. Over 99% of voting shareholders supported the final dividend of 13.68p per ordinary share including 8.43p to be paid out of capital.
The total annual dividend of 16.28p is an increase of over 110% on the previous financial year and represents a dividend yield of approximately 4.5%.
Harry Wells, chairman of the trust’s board said it was the intention to repeat this capital distribution in future years.
New Investment Trust Listings
Two new investment trusts were listed on the London Stock Exchange this month. The first was ScotGems (SGEM) a new trust run by Stewart Investors which will invest in global small cap companies, with a focus on Asia and emerging markets which is their speciality.
The trust will be managed by Ashish Swarup an experienced emerging market manager. The annual management charge will be 1%, with the OCF capped at 1.5%. There will be no performance fee.
Elsewhere Residential Secure Income (RESI), an investment trust investing in social housing listed on the LSE. It raised £180 million during its IPO, just over half of the target £300 million, and is targeting a 5% dividend yield, and a total return of 8% a year.
The trust will buy freehold property and leaseholds from housing associations and local authorities with the view to delivering secure, long-dated, inflation-linked income returns with the potential for capital growth. The trust said returns in this sector had a low correlation to the returns in the residential property market.
