UK - Fidelity Investments' DC clients are to be offered access to its high-performing retail funds, in a bid to boost choice for scheme members.
Invesco Pensions already offers DC schemes members access to retail funds managed by its sister company Invesco Perpetual and rival Fidelity Investments is set to follow suit by introducing a number of its currently retail-only funds into the DC market.
Fidelity head of DC business development Tim Banks said the line between retail and institutional management were starting to blur.
“At the moment, we’re working on putting into our DC range a number of our better-performing retail funds, where you do have higher risk, but the historical returns have been excellent.”
But consultants are sceptical. One senior consultant warned that two of the key benefits of institutional fund management – disciplined investment processes and thorough controls – did not exist in retail funds.
This, he said, meant funds were “much more volatile” as typically they were run by a single manager, which could be “quite dangerous” as members neared retirement.
Watson Wyatt partner Andy Hunt pointed to retail funds’ higher fees. He said: “One of the things that we’re trying to bring into the DC market is a discipline and focus on fees.
“We don’t want to go down the US route of having superstar retail funds being offered at rates not in keeping with the bulk buying power of an occupational DC scheme.”
Invesco Pensions chief executive David Butcher said the concerns were less applicable to younger scheme members.
“When you look at the consumer, particularly younger employees, the appetite for risk is that much greater and there’s no reason why they shouldn’t be able to purchase retail-type funds on a DC platform,” he said.
“From an employee’s perspective, what you are looking for is not only the fund and the track record, you’re also looking for brands that are well known and recognised, which is why we offer retail funds to DC investors.”
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