Way Fund Managers sees its new absolute return funds of funds as part of the “next generation of funds with next-generation costs”.
The Way absolute return portfolio fund has a low annual management charge and a tiered performance fee structure, which it shares with the Way Asian Spice and Way freestyle growth portfolio funds, which are not funds of funds.
An annual 1 per cent charge, including 0.5 per cent renewal commission to IFAs, is payable in the retail share class of the absolute return fund.
This share class is available for lump sum investments from £1,000 and monthly investments of £100.
The institutional share class is available for lump sum investments of at least £50,000 and has a 0.5 per cent annual management charge, with no renewal commission payable to advisers.
Both share classes have a performance fee that is taken only when the funds has returned at least 5 per cent a year. If the fund returned between 5 and 15 per cent a year, Way will get 10 per cent of this as a fee. For returns above 15 per cent a year, the performance fee rises to 20 per cent.
Way says this type of fee structure is only possible for more volatile funds that have the potential to generate higher returns. It has made this fund’s performance fee scale lower than the Asian spice and freestyle funds because it has a lower-risk profile, so the returns generated will be more modest in comparison.
Way Fund Managers sales and marketing director Eddie O’Gorman says: “The absolute return portfolio fund aims for positive returns from a low cost basis. For example, someone can make 10 per cent a year at the cost of 1 per cent.
“Most funds have a flat structure in terms of performance fee but our approach means that if the investor makes money, we make money. If the manager does not do his job, then we will take the hit.”