View more on these topics

Brewin Dolphin slashes fund costs in managed portfolio service

Money-Coins-Pound-Currency-Close-up-700x450.jpgBrewin Dolphin is cutting costs by up to 18 basis points on funds in its managed portfolio service as it introduces segregated mandates for core asset classes.

Star fund managers including Neil Woodford and Nick Train are among the line-up to run segregated mandates in the manager-of-manager approach for four core asset classes.

The MPS’s global equity portfolio will see the largest drop in charges with underlying fund OCFs falling 27 per cent from 69bps to 51bps. The balanced portfolio sees the smallest fall on underlying costs, but will still drop 10bps to 52bps – a saving of 17 per cent.

Maitland is the authorised corporate director with a fee of 5bps, which is included in the reduced fees.

Brewin Dolphin will continue to charge 0.3 per cent for running the portfolios, which also include cautious, income and growth options.

The reduction in charges results from Brewin Dolphin investing directly with managers through segregated portfolios for UK equity, UK equity income, North American equities and global bond strategies.

Impact of segregated mandates on underlying fund OCFs

MPS Model Before (bps After (bps) % reduction
Cautious 63 50 21%
Income 65 52 20%
Balanced 62 52 17%
Growth 69 55 20%
Global Equity 69 51 27%

The 40 per cent of the MPS that invests in equities from other regions, property and absolute return will remain in third-party retail funds.

Head of research Guy Foster says they started considering the segregated mandate approach when assets hit £2bn towards the end of 2016.

Now assets are around £2.5bn, having grown from just £500m in September 2015. “That’s the level of assets we think works for this manager-of-manager approach,” Foster says.

Foster says the segregated mandates will be more cost efficient when it comes to transaction charges, because entire fund holdings do not need to be sold when managers are switched or if a manager changes firms.

Further savings will be passed on to investors as assets pass certain thresholds, Foster says. “What we don’t know is how much MPS will grow or in what timescale.”

In aggregate the changes will save investors £3m annually.

The MPS is available on 11 platforms: Aegon, Ascentric, Aviva, Fusion, James Hay, Novia, Nucleus, Standard Life, Standard Life Elevate, Transact and Zurich.

Woodford makes the cut

Foster stands by the decision to retain Woodford, who suffered underperformance in 2017, to run one of the segregated mandates for UK equity income.

“He’s had periods of underperformance and we expect him to have periods of underperformance. Historically, it’s been a good time to take advantage of those periods of underperformance to invest with him,” Foster says.

Segregated mandates for core portfolios in MPS

Fund: Fund house: Manager name:
UK Equity Investec Asset Management Alastair Mundy
JP Morgan Asset Management Team based
Lindsell Train Nick Train
Miton Gervais Williams/ Martin Turner
Old Mutual Asset Management Richard Watts
UK Equity Income Columbia Threadneedle Team based
Investec Asset Management Blake Hutchins
Man Group Henry Dixon
Woodford Neil Woodford
North American Equity Baillie Gifford Tom Slater and team
JP Morgan Asset Management Clare Hart
Global Bonds Deutsche Asset Management Team based
Insight Investment Harvey Bradley and team
Pimco Ketish Pothalingam and team
Robeco Team based

Foster adds: “In 2009 to 2011 [Woodford] underperformed and he got all of that underperformance back in a quarter, which is why this mechanical rebalancing service that MPS-type services offer works so well.”

The MPS portfolios are rebalanced monthly.

European and emerging market equities don’t feature in the switch to segregated mandates because in the past they have gone to zero weightings in those asset classes. “We obviously wouldn’t be able to do that in a manager-of-managers approach for those particular asset classes,” Foster says.

In a contrarian move, US equities are currently the largest overweight in the MPS portfolios, accounting for 20 per cent of the balanced portfolio. Portfolios are slightly overweight UK equities, which are 33 per cent of the balanced portfolio, and are underweight bonds, which account for 16 per cent of the balanced portfolio.

Foster says: “The thing we’re looking at closest at the moment is emerging markets because the evidence of China slowing its stimulus trying to slow its economy down. It’s very crowded at the moment.”

Recommended

Brewin Dolphin eyes adviser hires in planning push

Discretionary fund manager Brewin Dolphin has said it is committed to financial advice after setting up a financial planning academy and hiring a raft of advisers last year. Financial planning income increased £17.5m to £20.8m in the year to the end of September, results released this morning show. Brewin revealed it had made a total […]

Europe-European-Flags-EU-700.jpg

European equities 2018: Bond market volatility & the market implications

Rob Burnett, Head of European Equities, Neptune, discusses why he expects to see bond market volatility in 2018 and what the implications are for equities – particularly value strategies and European banks, where M&A opportunities are set to rise. Watch video here Important Information: Investment risks   This Fund may have a high volatility rating and past performance […]

Square Mile: How to improve clarity on fund costs

The FCA interim report of its market study into the asset management industry has placed a flag into the sand that it believes investors should be increasingly discerning about the level of fees they pay for services. As early as the fifth point in the study’s executive summary, a chart details the potential impact of […]

Money-Cash-Coins-GBP-Pounds-UK-700x450.jpg

Vanguard cuts passive portfolio fund costs

Vanguard has moved to cut its fund costs by removing the upfront fee on its £2bn LifeStrategy range. The fund house previously charged a 0.1 per cent dilution levy on the range of five model portfolios, but has now removed this fee. The ongoing charge figure for each of the funds is 0.24 per cent. Vanguyard […]

Looking back at 2015

By Fiona Tait, Pensions Specialist 2015 was quite a year for pensions. Change, more change, and proposed changes to the changes. The Spring Budget – pre-election plans With everything that has happened since, it is hard to remember what happened in March. Following on from the bombshell of the 2014 Budget, the Chancellor confined himself […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Always said Brewins were profiteering. However, it shouldn’t take a review by the FCA to force these companies into line . They have had it too good for too long, it is about time the gravy train is finally pulling into the station.

Leave a comment