Fund capping to become more widespread

More and more investors are being excluded by the "soft closure" and size capping of retail investment funds, according to a funds management expert.

The head of funds at F&C Asset Management identified fund capping as one of the industry's most significant trends and predicted that it would become more widespread.

Richard Philbin suggested that fund groups are now behaving more responsibly and "acting to protect the performance records of their prize managers", while talented fund managers are limiting the amount of money they manage, thus protecting their ability to out perform the market.

"Whilst there clearly are some managers who have continued to run successful funds with assets of over a billion pounds, many other fund managers have less scaleable processes," Mr Philbin said.

He continued: "In the past there have been examples of funds which have become victims of their own success. Investors have chased the stars, thereby bloating the fund size and consequently this has forced managers to adapt their investment strategy away from the formula which delivered the initial success."

Mr Philbin added that traditionally open-ended retail funds, such as unit trusts and OEICs, had effectively discouraged new entrants in recent years by stopping marketing, removing funds from financial services products and raising minimum levels of investment, a process known as "soft closure".

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