Colonial First State has kicked off a massive product rationalisation which will see it close all the unit trusts it inherited when it bought Prudential last year, as well as six of its own trusts.
Colonial First State has kicked off a massive product rationalisation which will see it close all the unit trusts it inherited when it bought Prudential last year, as well as six of its own trusts.
In an effort to treat all unitholders equally Colonial has closed 15 trusts and given unitholders three months' notice of its intention to wind the funds up.
Colonial First State chief executive Bruce Abraham says this is the most equitable solution for all investors.
He is critical of managers that haven't rationalised their fund range as well as those who have, but have opted for what he calls either the "poor cousin" or "sunset" options.
The poor cousin option includes repositioning and remodeling trusts to sit alongside other funds, while the sunset option is to close the product to new investment and "postponing the inevitable".
"Fund managers in New Zealand generally take the easy road," he says. "They think it is far easier to introduce new products than to rationalise and tidy up their product range."
Abraham says winding up of the Prudential funds won't leave stock overhangs in the market as much of the process of liquidating unwanted shares has already been completed.
Under the rationalisation process Colonial will whittle 27 funds down to a total of 12. These dozen funds will reflects Colonial's strategy for having funds which are actively managed, invest in Australasian rather than New Zealand assets, and can leverage off the global capabilities of the Colonial group. Likewise the only asset classes Colonial offers funds in are Australasian shares, global bonds and global shares.
Abraham says all the costs of terminating the funds will be borne by the manager.
Other changes include altering the mandates of the share funds so they can hold up to 35 per cent of their portfolios in cash, increasing trail fees from 0.25 per cent to 0.30 per cent and changing the level of regular contributions from $50 to $200 monthly.
Colonial First State has kicked off a massive product rationalisation which will see it close all the unit trusts it inherited when it bought Prudential last year, as well as six of its own trusts.