Fidelity International reshapes cost model as active managers face rising pressure
Fidelity International, the £233.4bn asset manager, has radically overhauled its charging model by cutting ongoing fees and introducing a performance fee model, as active fund managers come under pressure to justify their charges.
The fund house announced today that it was scrapping its flat-fee rate across its active equity funds, as it moved towards a fee model traditionally associated with hedge funds.
This will include both reducing the annual management fee, which investors pay to cover a wide range of costs, and a change to a variable management fee that is symmetrically linked to fund performance.
The Bermuda-based company declined to provide details of how much this variable management fee will be. Hedge funds traditionally earn 20 per cent of performance above a certain hurdle, while also charging a two per cent management fee.
The company also announced it would pass on the cost of research under new European rules known as Mifid II to clients, a move that puts it at odds with the rest of its competitors.
Brian Conroy, president of Fidelity International, said: “We want to demonstrate real commitment to our active management capability. We will move away from a flat fee model and get paid according to how well we do for our clients.”