Consumer duty  

Review finds big gap in funds' assessment of value reports

Review finds big gap in funds' assessment of value reports
Peel Hunt has looked into the value assessments of funds.

The gap between good and bad value funds is expected to widen over time, according to analysts at Peel Hunt.

The investment bank assessed the value reports of asset managers covering listed and private companies following the introduction of new consumer duty regulations in July. 

The review highlighted that around 10 per cent of funds offered by St James’s Place did not offer sufficient value. 

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This is equivalent to 13 funds amounting to £16bn of assets under management (AUM), the assessment published in August showed. 

At the other end of the spectrum, of the 57 funds offered by Liontrust, just one was deemed to not offer value. 

An update from Peel Hunt said: “It is still early days in the implementation of consumer duty, but fund managers are already well versed in publishing value assessments. 

“So far, the general conclusion is that most funds offer value, with SJP being relatively unusual in highlighting c.10 per cent of funds that ‘delivered insufficient value’.

“We think that over time the FCA will inevitably expect more rigour and differentiation, which could impact future flows and widen the gap between good and bad.”

Tom Beal, director of investments at St. James’s Place, said: “This year’s value assessment statement reflects a change in our methodology as we build on our principle to improve clients’ understanding of their investments with the benefit of greater transparency.

"When you invest with SJP, there is a single ongoing charge that includes the cost of investment, but also all the other services you receive from us, as well as the cost of advice. So, this year we’ve calculated performance assessments including all fees. We’ve also included an assessment of the value from all these services when determining the most appropriate overall fund rating.”

Peel Hunt said if the FCA does push for a more objective assessment of funds, it could have an impact on flows into funds. 

Peel Hunt added that fund managers need to assess whether fees and charges are justified and if not, firms should publish these assessments alongside an explanation of what action has been taken.

tara.o'connor@ft.com

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