More passive fund providers are likely to cut their fees to remain competitive after L&G knocked up to 25 per cent off its annual management charges, although the market’s cheapest offerings are not expected to go down any further.
L&G reduced the AMCs on its tracker fund ranges by five basis points this week. The firm’s single country and regional index funds, which include the £4.2bn Legal & General UK Index Trust, have seen fees lowered from 0.2 per cent to 0.15 per cent, while fees on the core global index range have moved from 0.3 to 0.25 per cent.
AWD Chase de Vere head of communications Patrick Connolly says: “This has put L&G at the more competitive end of the market, more broadly aligned with the likes of HSBC and Vanguard. This is a sensible step for L&G.”
Bestinvest managing director for business development and communications Jason Hollands says L&G’s move is a “further skirmish in the index fund price war” in the passive space.
He says: “For those components of a portfolio where it is appropriate to use a passive fund, costs are going to be the single biggest factor in differentiating between index funds, so in this respect the ongoing price war is good news for investors.”
Chelsea Financial Services managing director Darius McDermott says: “There are still some legacy tracker funds that are expensive but I don’t see that bottom mark of 10 to 15 basis points getting much cheaper.”