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Warnings of backlash on multi-manager fees

Fund-of-funds providers could face resistance from investors if they

continue to hit them with costly and obscure charges in falling stockmarket

conditions, IFAs claim.

Research conducted for Money Marketing reveals that third-party fund

manager fees and attributable expenses continue to raise total expense

ratios for many multi-managers to between 2.5 and 3 per cent a year.

The worst offender is Artemis, which charges investors in its portfolio

balanced fund up to 2.95 per cent a year, while Jupiter hits clients in its

Merlin growth portfolio trust with an annual bill of 2.53 per cent.

Many others, including Credit Suisse, SEI and Rothschild Asset Management,

recently acquired by Insight Investment, charge at least 2.3 per cent.

IFAs believe providers will be forced to slash these charges if markets

remain volatile or face investors switching to funds with single-pricing

structures. Their prediction comes as a host of providers, including HSBC

and M&G, launch into the multi-manager market.

IFAs say new entrants may struggle to combat increasing investor resistance

to high charges. However, they admit that many advisers are guilty of

reinforcing the problem by taking renewal commission of 0.5 per cent a year.

Hargreaves Lansdown head of research Mark Dampier says: “Unless

fund-of-funds providers can reduce charges, there could be a backlash

against them. There are just too many mouths to feed. If people stop

accepting the charges, providers may lose business and investors could

start going direct, when they should seek advice.”

Artemis product development and communications director Nick Wells says:

“It is value for money. Investors are buying professional discretionary

management and, for smaller clients going forward, IFAs will have to use a

fund-of-funds approach.”

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