For the first time a major asset manager will make performance fees that take investors’ interests into account and don’t just benefit providers.
Fidelity announced that it will lower the basic charges applying to its fund range whilst at the same time introducing a performance fee linked to out-performance vis-à-vis the wider market.
This fee strategy departs from the all-pervasive model employed by fund managers across the spectrum up until now, where a manager charges extra fees in case of out-performance on top of the full asset-weighted fee charged irrespective of whether a fund under-performed the market or not.
Charging lower fees for under-performance, as announced by Fidelity, will imply a lower asset-based fee, which is far fairer and better aligned with investor interests. BETTER FINANCE had been calling for the industry to put an end to this practice of “HEADS I WIN, TAILS YOU LOSE” and commends Fidelity for leading the industry in the right direction.
Fidelity will also expand its range of passively managed funds that track a stock market index, such as, for instance, the FTSE 100, in order to meet growing investor demand for low-cost vehicles.
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