London-based Fitz says early-bird share classes by asset managers are no longer “uncommon” in Europe as they once were.
According to Fitz a growing number of asset managers in Europe offer lower fees to make investment into newly-launched funds more attractive and make up for a lack of track record.
The levels of discount offered vary but can be substantial, reaching 47% for equity funds, according to Fitz data.
The median management fee for early-bird equity fund share classes is 0.5% compared to 0.95% for mature equity funds, says the firm.
For fixed income funds, the discount offered on early-bird share classes is slightly lower at 40%, with the median early-bird management fee for bond funds at 0.36% against 0.6% for more mature funds.
Hugues Gillibert, chief executive of Fitz Partners said: “Incentives offered to first investors in new fund launches have always existed in various degrees but in the last few years we have seen a growth in the number of these early-bird share classes being launched.
“We have also seen a growth in the number of assets managers across Europe launching these seeding share classes with preferential fee levels. It is no surprise to see asset managers offering large discounts for seeding money or flows. It is an indication that in the case of new fund launches, pricing can make a difference and can compensate in some way for new funds’ lack of track record.”
Fitz says early-bird discounts often stop being offered after a pre-determined period or when the share class reaches a pre-determined asset size.
Fitz Partners tracks discounted ‘seeding’ share classes in its fund charges databases.