Fidelity's multi-asset team is finalising its move from investing in third-party funds to segregated mandates within its Open range, completing the launch of nine Irish-domiciled sub-funds this September.
The move has been a three-year process and the firm said seven have launched so far with the final two launching next month, all structured as Irish Common Contractual Funds (CCFs).
The sub-funds cover UK, Europe ex UK, global emerging market, Japan, Asia Pacific ex Japan, North America, fixed income (global aggregate), fixed income (sub-investment grade) and alternatives. Each fund will have between two and four third-party managers on it.
These will then be used by the firm's multi-asset Open funds and the Fidelity manager will be able to dynamically allocate to between the various sub-funds.
Fidelity said they had queried whether to have the funds in Luxembourg or Ireland but chose Ireland as the CCF structure had better tax transparency and would be quicker to make fund changes.
James Bateman, chief investment officer for multi-asset at Fidelity, said: "It has been a three-year project of building up the research and operations team and portfolio managers. We wanted to make something that it is good for ten years, not just right now, we want a future-proof solution.
"There are four reasons for the move: it expands our investment universe, we can tailor the funds to how we see fit, it improves data disclosure and it is more efficient."
He said clients had been receptive to the move away from third-party funds and Fidelity had been winning more business from IFA networks who were enthused by what the firm was doing.
Costs for clients have reduced as a result of the move with the largest drop being seen on the Multi Asset Open Adventurous fund where the ongoing charges figure (OCF) has fallen from 1.42% to 1.25%.
Bateman said he expected other large asset managers would move this way in the future but it would be difficult for smaller boutique firms to enact due to costs involved.
"It is a very advantageous type of product but you do need scale, I expect large firms will follow suit but small boutique firms will find it difficult, you need £100m-£200m per fund, so if you want nine funds then you need multi-billions of assets under management. You cannot start small with this."
This echoes comments from wealth manager Brewin Dolphin in January who also moved to segregated mandates but said it had previously been constrained from making the switch by the level of assets.
Bateman said there were still advantages to operating a fund-of-fund structure, one of which was the ability to move quickly in and out of fund holdings. However, he pointed out, this should not be necessary if a manager has long-term conviction in their holdings.
"If you have the ability to pick the right managers over the long term then you should not need to being moving in and out of funds, these vehicles are superior."
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