Fidelity chops rip-off fees for bad fund chiefs

ONE of the world’s biggest fund managers has launched a massive shake-up of fees charged to investors amid pressure for more transparency in the industry.

Fidelity – which looks after £233.4bn of clients’ money – will next year shift away from fixed fees for its actively managed equity funds, where experts pick specific stocks which they hope can beat the wider market.

Critics have long argued this model rewards lazy and underperforming managers who fail to boost their clients’ returns.

Instead Fidelity will charge higher fees if a fund beats the wider industry – but lower ones if it doesn’t.

This means bosses’ pay packets will be bigger when they maximise returns for investors.

Existing Fidelity investors can switch their money to the new fee structure when it is introduced but have the option of sticking with the current system if they prefer. This, however, will lead to higher costs than if they switch, after European Union rules on charging for research come into force in January.

Fidelity president Brian Conroy said: ‘Across the world our industry is being questioned on the value it provides clients. We believe today is the time for the industry to make fundamental changes to charges.’ The fund manager hopes to begin introducing the system early next year, with extra details to be revealed in the coming months.

Adrian Lowcock of investment firm Architas said: ‘Performance fees mean investors are effectively charged more for a fund manager being good at their job.’

Rival Allianz Global Investors plans to introduce UK performance fees next year.