JP Morgan Asset Management has today (July 1) reduced fees for many of its Luxembourg funds in a move that brings costs paid by individual investors more into line with those paid by institutions.
The manager has switched the operational and administrative costs for a portion of its Luxembourg Sicav with $9 billion of assets under management (AUM) from a fixed cost, to a capped, variable cost.
JPMAM says the move makes fund fees more transparent and allows clients to share in the benefits of JPMAM’s scale. It also sees 300 of the firm’s 2,000 Luxembourg Sicav share classes reduced or renamed.
The initiative means costs on the A, D and T share classes of many equity, emerging market fixed income and multi-asset funds will be reduced by 10 basis points.
Some share classes in the Lux range, namely the I (institutional), X and Y share classes, already operated within the expense caps. Adding these share classes to the share classes changed today and the total AUM for the JPMAM Luxembourg Sicav range impacted by these changes is $112 billion.
Massimo Greco (pictured), JPMAM’s head of Europe, says the initiative has taken months of “very complex” calculations.
As an example of the move from fixed to variable costs, Greco illustrates an equity fund with an A share class – which is for retail investors in Continental Europe – that has moved from a fixed cost of 40 basis points, to a variable cost capped at 30 basis points.
The cost could go much lower as the fund grows.
“If a fund stays small then it is capped at 30 basis points. But if it grows, the cost can go considerably below the cap.”
He adds: “Performance will go up by the exact amount of the reduction in costs.”
The move has nothing to do with the regulatory environment or with the creation of ‘super clean’ share classes. It is more of an ongoing effort to “share the benefits of scale with our clients”, Greco tells Funds Europe.
Greco says the firm has moved to be more transparent about the complex issue of costs and he says investor documents will be updated in the coming months.
Portfolio management costs are unchanged. Only operation and administration costs are affected.
However, in cases where the B share class was aligned to the C share class, the asset management fee is lower, too.
“We have one particular case when we had one share class, called B, which we aligned to C, and the cost now is that of C, which was cheaper.
“In this case, and contrary to what is happening elsewhere, every client is moving to a lower pricing point, including on the asset management fee. So in this case they will benefit from a reduction to both administration and portfolio management fees because they are moving to a share class that was reserved for larger investments.”
JPMAM’s custodian and administrator tasked with much of this work for the Sicav is JP Morgan Chase.
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