LONDON (Reuters) - Asset manager Allianz Global Investors is to offer British retail clients the chance to pay a lower yearly fee for some of its UK equity funds if they are prepared to give up a slice of any outperformance.
The move is the latest attempt by an active fund manager that picks assets for clients to counter low-cost exchange-traded funds that passively track indexes and have gained market share as cheap central bank money has curbed market volatility.
AllianzGI, which said its performance-fee option would be simple to understand and rival the cost attraction of passive products, follows the introduction of a new share class last year by peer Fidelity International.
“We want to regain market share from passive (funds),” Andreas Utermann, chief executive of AllianzGI, part of German insurer Allianz (ALVG.DE), told journalists. “Right now, it’s about levelling the playing field.”
Utermann said AllianzGI had chosen to initially offer the new share class in May for five funds, although others would follow. Clients could also choose to stick with their current structure, if they preferred.
The funds covered under the launch are Allianz Best Styles Global AC Equity, Allianz Emerging Markets Equity, Allianz Global AC Equity Insights, Allianz UK-Mid Cap and Allianz UK Opportunities, it said.
Each of the funds will have a low minimum fee to cover the management and fixed costs of the fund - four at 20 basis points (bps) of assets invested and one at 30 bps.
Any day the fund beats its benchmark, 20 percent of the outperformance accrues as a performance fee.
At the end of the year, if the fund’s overall performance has been positive, AllianzGI will be paid the total performance fee racked up during the year, Utermann said in a statement.
Underperformance will also be recorded on a daily basis and act to trim any previous outperformance. If the fund lags over the year, an investor will just pay the basis management fee.
“Moreover, any underperformance will be recorded and carried forward for up to a further five years, or until the underperformance is recovered,” Utermann said.
AllianzGI already offers some variant of performance-sharing in certain funds aimed at U.S. retail investors and those in several European countries.
Reporting by Simon Jessop; Editing by Mark Potter