Fund Times: Updates for Aberdeen, DWS, NavraInvest, Pengana, Vanguard
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In recent news from the funds management industry, Aberdeen has cut the fees on its international share fund, while Deutsche is raising the cost of a number of DWS and RREEF funds; NavraInvest has terminated its North American share fund, and Pengana its domestic listed property fund; and Vanguard has launched a suite of exchange-traded funds, and increased the fees for the hedged versions of its global funds.
Aberdeen cuts fees...
Aberdeen Asset Management is cutting the ongoing fee and buy/sell spread for Aberdeen International Equity from 1 June 2009. The ongoing fee will drop from 1.05 percent each year to 0.98 percent, and the buy/sell spread from 0.29 to 0.25 percent. Aberdeen said that it had made the decision in order to maintain consistency with the international share funds the firm completed acquiring from Credit Suisse recently.
From 1 June 2009, Aberdeen is replacing Capital International as underlying investment manager of the former Credit Suisse international share funds with Aberdeen's own international shares team, run by Stephen Docherty from Edinburgh. Morningstar Manager, Fund Analysis Chris Douglas discusses the implications of this shift in this video. We recently published a research report for Capital International Global Equities Unhedged and Capital International Global Equities Hedged, now distributed in Australia as standalone offerings by Ian Macoun's Pinnacle Investment Management.
...While Deutsche increases them
Deutsche Asset Management has announced that is increasing the fees for a number of funds offered under the DWS Investments and RREEF brands. The firm is introducing costs for recovery of expenses such as custody, fund administration, auditing, and tax advice. From 1 July, this will be added to the existing investment fee. Table 1 below shows the previous ongoing fee, the increase, and the new ongoing fees.
The increases reduce the DWS and RREEF funds' price competitiveness. The previous 0.90 percent annual fees for the unhedged and hedged versions of the DWS Global Equity Thematic funds meant that they were considerably cheaper than the retail world large-cap share fund average fee of 2.03 percent. While still meaningfully below the average, the increased fees are nevertheless an unwelcome development at a time when many investors in these funds have seen substantial falls in the value of their capital. Investors in the fully-hedged version of Global Equity Thematic were down 39.96 percent over the year to 30 April 2009, for instance, while RREEF Global Property Securities was down 53.68 percent. We have updated the references to these ongoing fees on our database and in our fund research reports.
Deutsche has been busy in recent months reshaping its Australian managed funds business. The firm has outsourced distribution to Ironbark Asset Management, a company run by Deutsche's former Australian Chief Executive and Head of Retail Distribution Chris Larsen. Deutsche has also trimmed the suite of funds it offers in Australia, terminating its Global Select, Global Smaller Companies, and Global Equity Gold & Precious Metals funds – the last of these after only five months of operation – citing their small amounts of money as making it difficult for the portfolio managers to implement their investment strategies.
Table 1: Increases to DWS/RREEF Managed Fund Fees from 1 July 2009
|Fund Name|| |
Previous Fee %pa
New Fee %pa
|DWS Global Equity Thematic||14109||0.90||1.11||0.21|
|DWS Global Equity Thematic (Hedged)||14745||0.90||1.12||0.22|
|DWS Global Equity Agribusiness||14845||0.90||1.12||0.22|
|RREEF Paladin Property Securities||5050||0.75||0.92||0.17|
|RREEF Global Property Securities||12114||1.00||1.22||0.22|
|RREEF Global (ex-Australia) Prop Securities||12113||1.00||1.22||0.22|
NavraInvest shuts down American fund
Steve Navra has shut down Navra Blue Chip American Share. Launched on 1 March 2006, the fund was run according to the firm's proprietary 'NavTraDe' process, which generates buy and sell signals on the basis of share price movements. Investment decision-making was then supplemented by other information sources such as financial statements, annual reports, and broker research, involving assessment of factors such as solvency, sales growth, profit margins, and competitive position.
The decision reduces the number of specialty North American share funds in Australia to 12 funds offered by BT Investment Management, Davis, Fidelity, and Skandia, as well as the iShares and Vanguard ETFs. Australians have comparatively little money invested in these funds, which at the time of writing had only A$50.65 million in combined assets. The tiny Skandia options in particular – the largest of which has less than A$500,000 in assets – seem unlikely to survive any product rationalisation initiatives in the aftermath of IOOF's recent acquisition of Skandia from Old Mutual.
Pengana terminates domestic listed property fund
Sydney boutique Pengana is terminating Pengana Property Securities. The firm is no longer accepting applications or redemptions of units, and anticipates the final return of capital to investors should be complete after 30 June 2009.
Pengana said that the decision to terminate the fund had been taken because the increased concentration in the listed property sector was limiting the fund manager's ability to provide diversification. The firm had considered expanding the universe to include Asian REIT stocks, but plans instead to launch a separate Asian listed property fund later this year which will opportunistically short stocks.
The decision to terminate the domestic fund doesn't come as a surprise. In our most recent update on 1 April 2009, we moved our Morningstar Recommendation to 'Avoid', commenting that the strategy's future was uncertain and suggesting that investors look elsewhere for their property securities exposure. We weren't completely sold on the ability of portfolio managers Tim Shaw and Elan Miller to run the process effectively.
Pengana Property Securities has been a poor performer relative to other domestic property funds, in the third or fourth quartiles of the Australian Real Estate category since launch in June 2003. The fund suffered especially during the extreme volatility in the AREIT sector over the past year, the fund's one-year return to 30 April 2009 of –59.52 percent almost five percent below the peer average return. Fund assets peaked at A$80.0 million at 31 October 2007 and have since fallen to A$13.89 million at 31 March 2009.
Vanguard Launches ETFs, Increases Hedged Global Fund Fees, Buy/Sell Spreads
Vanguard has made its long-anticipated entry into the Australian exchange-traded fund (ETF) sector, launching a suite of three ETFs on 8 May. Vanguard now offers competition to the Barclays Global Investors iShares and State Street SPDRs, the principal existing players in this area in this country.
Vanguard's three ETFs are Vanguard Australian Shares Index (VAS), Vanguard US Total Market Shares Index (VTS), and Vanguard All World ex-US Shares Index (VEU). The fee for Vanguard's Australian ETF of 0.27 percent each year is on a par with State Street's SPDR S&P/ASX200 (0.28 percent). The 0.09 percent annual charge for Vanguard's US index ETF is the same as Barclays Global Investors' nearest equivalent, iShares S&P500 (IVW). Finally, Vanguard's world ex-US ETF, which tracks some 2,200 companies in 47 developed and developing markets, costs 0.25 percent each year. These fees are all substantially cheaper than the equivalents for retail and wholesale unlisted managed funds, although it's important to remember that retail fund fees in particular frequently include a financial adviser trailing commission component, and a component which pays for access to a mastertrust or related platform.
In other Vanguard news, the firm is implementing small increases to the ongoing fees for its hedged global options from 1 June 2009. Vanguard said that the higher fees resulted from increases in the costs associated with hedging, in particular monitoring and management of trading activity across multiple banks. Vanguard being Vanguard, the increases do not substantially erode the index fund manager's cost advantage relative to actively-managed funds. Table 2 below shows the hedged funds whose fees are increasing. We have updated the references to these ongoing fees on our database and in our fund research reports.
Table 2: Increases to Vanguard Hedged Funds' Ongoing Fees
|Hedged Fund Name|| |
Previous Ongoing Fee %pa
New Ongoing Fee %pa
|Vanguard International Fixed Interest Index||6428||0.31||0.34||0.03|
|Vanguard International Credit Securities Index||9152||0.31||0.34||0.03|
|Vanguard Global Infrastructure Index||16242||0.51||0.52||0.01|
|Vanguard International Property Securities Index||13427||0.40||0.43||0.03|
|Vanguard International Shares Index||6430||0.36||0.39||0.03|
|Vanguard International Small Companies Index||15898||0.41||0.42||0.01|
Vanguard has also increased the buy/sell spreads for a number of funds, also effective 1 June 2009. Vanguard stated that the increases had been driven by higher costs of transacting in fixed income securities and implementing currency hedging, and that the firm would reassess the spreads it charges when markets return to more normal conditions. Table 3 below shows the funds affected.
Table 3: Increases to Vanguard Funds' Buy/Sell Spreads
|Fund Name|| |
Previous Buy/Sell Spreads %
New Buy/Sell Spreads %
|Vanguard Australian Government Bond Index||16868||0.05||0.1||0.05|
|Vanguard Australian Fixed Interest Index||4487||0.10||0.2||0.1|
|Vanguard International Fixed Interest Index||6428||0.10||0.2||0.1|
|Vanguard International Credit Securities Index||9152|| |
|Vanguard Index Diversified Bond||6432||0.15||0.25||0.1|
|Vanguard International Property Securities Index||13427||0.35||0.4||0.05|
|Vanguard Global Infrastructure Index||16242||0.35||0.4||0.05|
|Vanguard International Shares Index Hedged||6430|| |
|Vanguard International Small Companies Index||15898|| |