Fund managers under fire for increasing charges

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The Independent Online

Two leading City investment managers are set to raise millions of pounds from savers by raising charges, even though their funds are failing to keep up with rivals.

Two leading City investment managers are set to raise millions of pounds from savers by raising charges, even though their funds are failing to keep up with rivals.

Credit Suisse will tomorrow raise the annual management charges on its Income and Monthly Income funds, together worth £1.5bn, from 1.2 to 1.5 per cent. Independent financial adviser BestInvest said the fund manager would make an additional £4.6m a year from the increases.

Meanwhile, rival manager Threadneedle plans to increase the annual fee on three of its most popular funds - UK Monthly Income, UK Growth & Income and UK Equity Income - from 1.25 to 1.5 per cent in each case. Both of these price rises will take effect from 15 June.

BestInvest said the increase in charges on the three Threadneedle funds, which collectively hold £1.6bn worth of investors' money, would earn the manager extra revenue of £4m a year.

"The decision to raise charges shows these groups have their own, rather than investors' interests at heart," said Justin Modray, an analyst at BestInvest. "None of these funds has been a star performer over the past three years; in fact, the Threadneedle funds have been positively dire - they are all in the bottom 15 per cent of funds in their respective sectors."

Toby Hogbin, spokesman for Credit Suisse, said the higher charges reflected the increasing cost of distributing products and complying with regulation. "These funds were set up in 1988 with an annual management fee well below the norm and we are now bringing them into line with the rest of the market," he said.

Stephen Moore, a spokesman for Threadneedle, claimed the company was bringing its charges into line with average fees charged by other managers. "We accept there is a performance issue here, which is why we have recruited a new head of UK equities in recent months," he added. "We have held off raising our charges to the levels charged by our rivals for as long as possible."

The two managers' fee increases follow a similar move announced by Invesco Perpetual last year. It raised charges on four funds by similar amounts to Threadneedle and Credit Suisse, though the products affected included the top-performing High Income unit trust.

BestInvest called for fund managers to make better use of new rules from City regulators that allow them to charge fees that are dependent on performance.

Modray added: "They should put their money where their mouth is and adopt performance-related fees, rather than raise the charges on underperforming funds."

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