In a move that could herald a shift in strategy to passive, M&G Prudential will overhaul three fund ranges next year with names, charges and objectives changed.
In a message to advisers seen by New Model Adviser®, Pru announced two multi-asset fund ranges, Dynamic Portfolio and Dynamic Focused Portfolio, will take on the passive moniker (see table below).
Such a move to rename funds as passive is a rare step – particularly for a company so focused on active management. It will also create greater distinction between passive and active funds.
The three ranges affected are Dynamic Portfolio Funds, Dynamic Focused Portfolio Funds and Risk Managed PruFund funds. Pru said it will not be making any changes to the PruFund Growth and PruFund Cautious funds.
The insurer also said it will be reducing the fund charges for the Dynamic Portfolio and Dynamic Focused Portfolio fund ranges and changing fund objectives from an equity target band to a volatility ceiling.
The fund range reform will see underlying investments changed, which Pru warned could hit clients if they leave in the ‘transition’ period.
‘Currently, the investment objectives and names of these funds specify how much of the fund can be held in equities,' the message to IFAs said. 'Managing the funds within these equity constraints doesn’t necessarily enable the fund managers to target a specific level of risk. We believe targeting volatility is a clearer way to align the fund objectives to your client’s risk profile.’
|Type||Current name of fund range||New name of fund range|
|Oeics||LF Prudential Dynamic Portfolio range||LF Prudential Risk Managed Active range|
|LF Prudential Dynamic Focused Portfolio range||LF Prudential Risk Managed Passive range|
|Life and pension funds||Prudential Dynamic Portfolio range||Prudential Risk Managed Active range|
|Prudential Dynamic Focused Portfolio range||Prudential Risk Managed Passive range|
|PruFunds||Prudential Risk Managed PruFund range||No change|
*New names for fund ranges from 21 January 2019
The message added that, although fund names and objectives are being changed, the Prudential risk ratings will stay the same.
The changes, due to come into effect in January will however mean Pru will be changing underlying investments in the funds and the insurer warned this could affect clients if they leave during this period.
‘With the new investment objective and the flexibility this brings, the fund managers will change the underlying investments in the fund by buying and selling assets as soon as possible from 21 January,’ the message said. ‘There could be an impact for your clients if they leave the fund during the “transition period” after the fund changes happen. We estimate an impact on fund performance that will last for approximately five to nine months, depending on the fund your clients are in.’
Currently M&G Investments provides the active asset management for many of the Pru fund ranges, with Legal & General Investment Management providing the passive management.
Prudential Portfolio Management provides fund oversight, governance and asset allocation decisions.
The changes come as Pru announced last week a new focus on its adviser offering with ISAs, bonds and new funds to be added to its online portal.
A spokesman said: ‘Prudential is planning on making a series of changes to some of our funds to enhance the investment options available for professional advisers and customers. We have begun to brief advisers about the proposed changes and will reveal more details when the changes are due to be implemented in January.’