Fees 'still too high'

Pie Funds' move to cut performance fees should prompt useful industry discussions - but isn't in itself a good move for investors, Morningstar director of manager research ratings, Asia-Pacific, Chris Douglas says.

Tuesday, June 19th 2018, 6:00AM

by Susan Edmunds

Pie Funds revealed earlier this month that it was cutting performance fees entirely and boosting management fees on its funds.

Douglas said competitive pressure should be expected to change behaviour and how fund managers engaged with their clients.

"If you get one making a change like this the others watch what develops."

He said Morningstar was not praising the move itself, though.

Pie Funds' specialist funds will all now charge 1.85 per cent total fees, active equity funds 1.45 per cent and semi-active conservative fund 0.7 per cent.

Douglas said that was high but, as a flat fee, it was easier for investors to understand.

"1.85 per cent is still a decent whack of a fee paid to invest in these funds. I wouldn't say it's a great move by any stretch."

Douglas said he would expect other fund managers to look at their fee structures in response.

"They might still have performance fee structures [but it might mean] having clear, transparent fees and making sure people understand exactly what they are paying."

He said, if fund managers did not act, they should expect investors to start looking for better solutions elsewhere. That was a trend that had been seen around the world, he said.

Fees were becoming a more obvious issue as regulators highlighted fees and the media talked about it more.

"I'd expect to see changes but they don't happen quickly. Investors can quickly change their minds but fund managers aren't so quick to act."

Tags: Morningstar pie funds