Legal & General cut fees as RDR reforms heat up battle for cash

Michael Bow
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THE UK’s biggest money manager Legal & General yesterday announced a wave of cuts to tracker fund fees amid increasing price competition among large retail fund managers.

The group’s L&G Investments (LGI), which manages £243bn of index funds, cut management fees by five percentage points, taking fees down to 0.15 per cent on 11 of its most popular passive funds and 0.25 per cent on a further four funds.

The move is in response to the increasingly competitive actions by rivals BlackRock and Vanguard, which have both reduced fees over the past six months, as firms battle for savers’ cash.

Yesterday’s reduction includes a cut to one of the most popular funds in the country – the Legal & General UK Index Trust with £4.24bn of people’s savings under management.

The group said it had reduced the fees in anticipation of changes wrought by the retail distribution review (RDR) – which came into effect in January and outlaws adviser commissions – which could be a “watershed moment” for interest in passive funds, it said.

“Investors want good value funds,” said Simon Pistell, managing director at the company. “This is about improving the value of our range whilst keeping our focus on simple, high quality and close-tracking index funds that are domiciled in the UK and invest in physical assets wherever possible.”

LGI’s big passive rival in the retail space, BlackRock, launched a new range of RDR-ready funds last July with a 0.2 per cent charge.

Last month the group revealed it had generated £875m of fee income in 2012, but this was down from £897m made in 2011.