Allianz Global Investors, an asset management subsidiary of the German insurer, is to offer performance fees to UK retail investors, in the latest sign active fund managers are fighting back against cheaper passive providers.
AllianzGI, which manages €498bn globally, will launch new share classes in May. These will charge base fees that are similar to those on equivalent exchange traded funds, but with as much as 20 per cent of the outperformance going to the manager.
“The price of beta has come down to virtually zero,” said Andreas Utermann, AllianzGI’s chief executive. “We are responding to that.”
He said active managers had been too slow to react to the threat of passive funds.
The growth of index funds, which are designed to replicate market returns for a fraction of the cost, has massively outpaced active products in recent years. Active managers have struggled to justify their higher fees during a period of strong markets.
But a return of volatility this year has been welcomed by active managers, who believe they can show their value in choppier periods.
AllianzGI introduced a version of performance fees to its US fund range last year, known as fulcrum fees. These structures were designed to comply with strict US mutual fund rules and differ to the performance fees for the UK market.
The new UK model will initially apply to five funds: best styles global AC equity, emerging markets equity, global AC equity insights, UK mid-cap and UK opportunities.
AllianzGI will consider rolling out the model to its other retail strategies and institutional offerings in the UK. It already offers institutional clients performance fees in continental Europe.
Mr Utermann said the new model had been planned for five years and the fund manager had been in discussion with the Financial Conduct Authority, the UK regulator, over the past year over their introduction.
The FCA published a study into the UK’s asset management industry last year that was critical of how performance fees had been designed in the past.
Last October Fidelity International, the Bermuda-based fund group with $255bn under management, rolled out fulcrum fees and challenged other asset managers to introduce performance incentives into their fee structures.
In announcing the new fee model, Mr Utermann said: “This will truly be disruptive to the industry.”
Get alerts on Allianz Global Investors AG when a new story is published