Dirty funds

bry54

I purchased £122K of M&G unit trusts through my IFA over 5 years ago ,they are now valued at 156K.
I decided to transfer them to iii but yesterday I was informed by them that they couldn't accept them as they are dirty funds , it's the first time I've ever heard of this term.
It seems that I will have to sell them and move the money to iii and purchase new stocks and shares. Luckily 86K of these are in an ISA .
I will have to sell the remainder this year and next tax year to avoid CGT.
Anyone any thoughts please?

bowlhead99

Dirty funds, as distinct from clean-priced funds, have a high management fee built into them which is paid out of the fund assets on an ongoing basis, sufficient for the manager to allow a kickback to the platform or adviser through which you acquired them, so you don't need to pay your ongoing costs out of your own pocket.

Those "dirty" or bundled-priced funds have recently become obsolete after the last FCA reviews, in favour of clean priced funds where you get a lower management fee within the fund itself and pay your own platform admin charges to your platform, making everything a bit more transparent.

To support this, FCA made providers only offer access to the clean funds for new customers and move existing customers over to the clean version of the fund to get the transparent pricing.

However, if you are direct with the fund manager instead of being on a platform, you might still be stuck in a dirty class, with the manager just keeping the "kickback" money for himself.

As platforms like iii don't support the old dirty classes they don't have to take you and your dirty fund into their system when everyone else is on a clean one. Meanwhile, you are stuck paying high management fees with lack of choice on where you can take it unless you move to cash and take the cash.


If your platform of choice won't take your dirty fund, it may be worth investigating if the manager can "convert" your dirty class into a clean class prior to an orderly transfer out. A conversion doesn't trigger CGT AFAIK, but a redemption out of one class and subscription to another, would.

dunstonh

Those "dirty" or bundled-priced funds have recently become obsolete after the last FCA reviews, in favour of clean priced funds where you get a lower management fee within the fund itself and pay your own platform admin charges to your platform, making everything a bit more transparent.

I would just add a caveat to that. Whilst they are largely obsolete on ISAs and unwrapped, they can still exist on pensions that use OEICS/UTs. I have dozens of clients with bundled funds where it is cheaper to remain on the old share class than it is on the new one. With pensions, you get the choice to stick with bundled or move to unbundled.