Your guide to how charges are changing for investors in M&G funds - effective 1 August 2019.
Our charges vary between the funds that you can invest in, and then by the class of share you might hold. The more you invest in a fund, the lower your charges will be as a percentage of your investment.
For each fund, you will pay an ongoing charge plus a share of portfolio transaction costs (the costs incurred when funds buy and sell investments). There are no extra charges or hidden costs, which means no entry or exit charges on your investment.
Ongoing charges include payments made to M&G – for investment management and administration – and to providers of services independent of M&G. We have pulled together most of the charges that make up the ongoing charges figure (OCF) on our funds into an annual charge and made them more predictable. Only exceptional items such as unforeseen legal and tax expenses, also known as extraordinary expenses, will be excluded from the annual charge.
The OCF is calculated in line with regulatory rules and guidance that apply to all funds that produce a Key Investor Information Document (KIID) and is intended to help investors understand the impact of charges on their investment each year and to compare the level of those charges with the level of charges in other funds.
If you are invested in the M&G Property Portfolio, the annual charge will only contain costs of running the fund. Expenses related to managing the properties within the fund will be disclosed separately. This does not change the overall amount you pay to invest in the fund, but it will help you to compare costs more easily with other property funds.
We have also introduced discounts on the annual charges of our larger funds, to reflect potential savings from economies of scale.
Portfolio transaction costs
The transaction costs are the costs incurred when buying or selling underlying Investments. These are composed of direct transaction costs and indirect transaction costs:
- Direct portfolio transaction costs - Costs incurred when the fund buys and sells investments and includes commission paid to brokers and taxes. These transactions are the result of active investment decisions made by the fund manager for the benefit of all investors.
- Indirect transaction costs - In addition to direct portfolio costs, there are indirect transaction costs caused by the fact many investments have a bid-offer spread which is the difference between the buying and selling prices of investments and their actual value (known as the mid-price). These costs are different from direct costs since there is no specific cash payment (unlike direct transaction costs) but do have an impact on the performance of the fund. Some types of investments, such as fixed income securities, have no direct transaction costs and only the indirect transaction cost is incurred. For the M&G Property Portfolio, please note that there is no market bid-offer spread on property assets.
To protect investors, portfolio transaction costs incurred as a result of investors buying and selling shares in the fund are recovered from those investors through an adjustment to the price they pay or receive. Total portfolio transaction costs can appear as negative if the amount recovered through the adjustments is more than the costs paid by the fund.
The Investment Association (IA) has produced an independent guide to costs and charges, which you can view on their website. Please note this will open in a new window.