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Fidelity reveals details of new fund pricing structure

Fidelity International has revealed details of how its performance related fee model, referred to as a ‘fulcrum fee’, will work.

Fidelity reveals details of new fund pricing structure

Fidelity International has revealed details of how its performance related fee model, referred to as a ‘fulcrum fee’, will work.

There will be four key features in the new structure. 

* Fidelity will reduce the annual management charge (AMC) on the new variable management fee share class by 0.10%.

* The variable part of the fee will slide up or down based on how the fund outperforms or underperforms relative to its pre-defined market index, after all fees and charge. This scale will reach a maximum of +0.2% above the annual management charge (the ceiling) and go as low as -0.2% below the annual management charge (the floor).

* The maximum and minimum fee levels are reached once the fund outperforms or underperforms the relevant market index by +2% or -2% on an annualised basis calculated over a three-year rolling period.

* Importantly, the fee will only start to increase from the base level once the fund has beaten the market index after all fees and charges.

Fidelity provided an illustration (see below) of the variable management fee for an Oeic fund with a 0.75% AMC. 

 

The example shows the fee will only start to increase from the base level once the fund has beaten the market index after all fees and charges.

Subject to regulatory approval, the new structure will be launch on 1 March 2018 initially across the clean share classes of 10 active equity funds (12 share classes) in its pooled fund range (Oeics/Sicavs) representing a cross section of funds which account for nearly 17% of Fidelity’s total equity assets under management. 

Additional share classes across the Fidelity funds range will be phased in at later dates. Clients with segregated portfolios including institutions and investment trusts will have access to an individually adapted version of the fee model.

Brian Conroy (pictured), president Fidelity International, said: 'We are passionate about giving our clients both choice and value, and we believe innovation in fee structures is essential if active fund management is to succeed going forward.

'Our variable management fee clearly aligns our interests to our clients. We believe this is a meaningful step and also one that we hope will be adopted by the wider asset management industry.' 

 

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