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JP Morgan AM Launches Low-Cost Active Fund To Rival Passive Sector

Harriet Davies, 1 February 2011

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JP Morgan Asset Management is launching an actively managed fund which it claims challenges the passive industry with its low fees.

The firm has renamed the JPM UK Active 350 Fund the JPM UK Active Index Plus Fund, and reduced the fees to an annual management charge of 0.25 per cent, with fixed expenses of 0.15 per cent per annum. The fund aims to outperform the FTSE All-Share index and will charge a 10 per cent performance fee with a cap when it does, with a maximum total expense ratio of 0.55 per cent.

The fund will continue to be managed by the same team as before, led by Michael Barakos, and will employ the same investment process but with a “lower risk management framework”, according to the firm. The fund’s benchmark has also been switched, from the FTSE 350 index to the FTSE All-Share.

“We know that today’s investors are increasingly concerned about fund charges and a preferred route to seeking lower cost funds has been through lower risk investments,” said Jasper Berens, head of UK retail sales at JP Morgan Asset Management.

“However, the solutions currently available to them are dominated by passive tracker funds. We believe that many investors buy these funds because they are low cost rather than because of a specific preference for passive management. We’ve now created a low cost, actively managed alternative that meets investor demand and is ‘RDR ready’ with all advisor commissions stripped out,” he added.

A number of wealth management firms have launched since the financial crisis offering passive investments as a low-cost way of building a portfolio. One example is TCF Investment, which has been vocal in criticising the industry for “product pushing” and providing poor value. Another example is SCM Private, a UK investment house that uses exchange-traded funds to build its active management strategy, which recently said that its use of low-cost ETFs was crucial to its outperformance of fund peers last year. Net of fees and other deductions, the SCM Absolute Return Portfolio, the firm says, logged returns of 12.4 per cent for the 12 months to the end of last year, ahead of the average IMA Absolute Return fund return of 4.6 per cent.

 

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