HSBC mulls low-cost fund launch

HSBC says it is looking to launch a low-cost active fund following in the footsteps of Schroders and JP Morgan.

Head of UK external distribution Phil Reid says more investors are focusing on cost and return, so it is vital to offer a range of market options.

He says: “We are looking at the middle ground between active and passive and we might come out with something fairly soon.”

In February, Money Marketing revealed JP Morgan was launching a low-cost active managed fund, the UK active index plus.

It has a performance fee that is capped to ensure the maximum total expense ratio is 0.55 per cent, plus an annual management charge of 0.25 per cent.

Last month, Money Marketing revealed Schroders is adding a third low-cost dynamic multi-asset fund to its range, designed as an alternative to passive investing, ahead of the retail distribution review. It will have a capped TER of 0.5 per cent, including an AMC of 45 basis points.

Schroders kicked off its low-cost range in March with the launch of the UK core and QEP global core offerings.

Reid says HSBC’s fund will not necessarily look like the JP Morgan and Schroders vehicles, which are “still taking punchy bets on funds”.

Bestinvest senior adviser Adrian Lowcock says low-cost funds work well in the UK large-cap and global sectors.

He says: “There seems to be a trend emerging with a number of these low-cost active funds launching on the back of the RDR. I expect that there will be an explosion of these types of funds and eventually there will be too many, bringing consolidation in the sector and leaving a few successful managers.”