Cofunds, the UK’s largest independent fund platform, is engaged in a massive expansion of fund links as it builds out its services to institutional customers.
Earlier this year the company announced the launch of Cofunds Institutional Services, a dedicated business unit which provides the specialist dealing, settlement and accounting services required to incorporate investment funds into portfolios of other securities. Cofunds clients include discretionary asset managers and stockbrokers, life insurance companies and SIPP administrators.
Cofunds main platform offers about 1000 different funds. However, many of these funds have two or more different share classes or “instruments” A typical example would a fund with “income shares”, which pay out dividends, and “accumulation shares” where income rolls out up in the price. Adding all these separate share classes together, Cofunds currently offers some 2000 differently priced instruments.
Cofunds Institutional is now in the process of adding another 1000 instruments to give a 50% increase in the number of prices carried.
Some of these are a further share class from an existing fund. For example, many retail funds now also offer an “institutional share” with a high minimum of, perhaps, 100,000 or more, no initial charge, lower annual charges and no trail commission. Bond funds can also offer “gross shares” which, for example, can be bought by SIPP providers and obviate the need to apply for a tax reclaim from HMRC.
However, some of these new additions are funds which are not commonly used by retail intermediaries and will be made available exclusively to institutional clients.
“In the retail funds market there is quite a concentration of usage. Generally the 80/20 rule applies where 80% of fund activity is focussed on 20% of the funds on the platform. However, fund activity for our institutional clients is more dispersed so a wider range of funds is used as you might expect with specialist discretionary managers. Moreover some of the funds our clients wish to use are not those we see commonly in the retail market.
“As our Institutional Service business is growing rapidly, we need to put many new instruments on the platform. Our ambition is to offer 100% market coverage which means that the 1000 new prices we are now in the process of listing is only an interim step. We estimate that there are yet another 1000 prices we need to arrange to capture before the process is complete. Therefore, when this project is finally complete, we will provide some 4000 price links. We believe that this will be an unrivalled range of fund prices and will provide the most comprehensive administration package available to institutional investors,” says Christopher James, director, Cofunds Institutional Services.