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Famous five lose sense of venture

Speculation as to which fund managers will be part of Fidelity&#39s fund supermarket when it launches in June ended last week when the 14 participating names were announced.

Although Mercury, Invesco and Schroder are all on board, the final line-up lacks five of the biggest players. M&G, Gartmore, Thread-needle, Jupiter and Perpetual have all opted out.

The industry is witnessing a mixed reaction to the fund supermarket concept. While IFAs seem to be welcoming the idea with open arms, many of the big fund managers have been more cautious.

Torquil Clark e-commerce manager Mike Attree says: “I can see that a lot of managers might take a wait and see attitude but the US experience shows that fund supermarkets do work, they are popular and managers will find themselves forced to join them.”

Fidelity&#39s fund supermarket, to be called FundsNetwork, will enable IFAs to conduct most or all of their client transactions online. The 14 fund managers offer a total of 256 funds, of which 34 per cent are top-quartile over three years.

FundsNetwork is not the UK&#39s first internet investment venture. Egg was the first to coin the title of supermarket in March with an operation based on direct sales. However, Fidelity has been the first company to target IFAs.

Earlier this month, in a move confirming Fidelity&#39s commitment to the IFA community, Torquil Clark, Hargreaves Lansdown, Chase de Vere and Best Investment signed a deal to run FundsNetwork through their own-branded websites.

Attree says: “The IFA reaction when Egg launched was that this could be dangerous because IFAs were not involved but Fidelity has opened up its supermarket to all IFAs and seems to be there to help us.

“If I was looking at it from a one-man IFA perspective, I would be thinking: &#39What can it do for me?&#39 Ultimately, you can have your client buying online from the Fidelity supermarket and still get paid for it. That&#39s what is so appealing.”

But the view of the big players which have stayed away from FundsNetwork remains one of scepticism towards the supermarket concept. Threadneedle communications director Richard Eats says: “I think there may be two areas of concern. First, that this form of intermediary could cut us off from our customers. We aim to provide a high level of service but we would not know who was buying and selling.

“Second, there was concern about whether the finances would be effective. There are other platform providers and there will probably be a number of different models. We may want to wait and look around before we commit to anything.”

But Fidelity executive director Robin Threadgold still believes most of the renegades may join Fidelity at a later stage. He says: “We think our list will grow but, in the first phase, the reaction from IFAs has been very positive. We are very happy with the brands and quality of funds that the 14 can put on the table.

“I think fund supermarkets will become very influential here. In the US, almost 10 per cent of investment is now carried out through fund supermarkets and I think investors like the notion of having all their funds in one place.

“We envisage a similar evolution of supermarkets to the US where we will see a proliferation of new start-ups followed by a period of intense competition, with a small number finally controlling the market. I think there will be plenty of competition and that will be a good thing. It will ultimately leave a better deal for the investor, which is our aim.”

Already, competition seems to be mounting, with national IFA Inter-Alliance&#39s launch of its own site last week and speculation that Egg may develop its platform along the same lines as Fidelity. However, IFAs&#39 faith rests for the moment with Fidelity.

Chase de Vere&#39s Graham Hooper says: “Fidelity is one of the two biggest players in the US so you have to trustits technology. It has a great range of fund managers and, although M&G and Gartmore would have been nice, I think it is important to be involved even without the bigger players. Just because something is on the fund supermarket, it does not mean we will be using those funds exclusively.”

Even the sceptics are resigned to the fact that online trading is likely to be the future for investment.

Although Fidelity&#39s experience in the US gives it a headstart, the coming months may present a preliminary battle of technology versus size. The five outsiders have the clout to take on Fidelity in a rival supermarket but, with doubts over the reliability of platforms such as Egg, it is doubtful there are any serious technological contenders.


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