Moving M&G dirty funds to a platform

barneagle

I want to transfer my ISA holdings to a platform (with a view to simplifying them and saving ongoing fees). For the amounts involved a fixed-fee platform such as Interactive Investor appears to be attractive. However, several ISA investments are in M&G A and X class units and II will only accept in specie transfer of I class units. Unfortunately, the I units are not available to me as a retail investor. In order to get the ISAs transferred M&G have suggested that I shall need to sell the existing investments then wait for a cheque(!) to be sent to II, after which I shall have to wait for II to notify me that the cheque has cleared before I can reinvest the money. Is there any way to get my investments transferred to the platform without having to be "out of the market" for a week or two?

george4064

Do you currently hold the units directly with M&G?

barneagle

Do you currently hold the units directly with M&G?

Yes! I do.

dunstonh

Most platforms will accept a re-registration of the units in and remain in bundled form. Some will leave them in dirty form but some will force a conversion (which is not out of market).

The main issue is whether M&G will do re-registration.

shall need to sell the existing investments then wait for a cheque(!) to be sent to II, after which I shall have to wait for II to notify me that the cheque has cleared before I can reinvest the money.

This will be because II do not offer prefunding. Prefunding is common on the advice side but the DIY platforms have not embraced it. Probably as it costs money and the DIY side is more focused on lowering costs than features/functionality that may cost.

The first thing to do is ask M&G if they support re-registration of the funds to a platform or whether cash transfer is the only way they will do it.

barneagle

Thanks very much for your help.

Is re-registration the same thing as "in specie" transfer? I have asked both II and M&G about transferring. The existing units are in A and X classes. II say that they cannot accept them; they can only hold I class units. M&G say I can't convert to I class units because they are only available to institutions who have more than £500,000 to invest. So between the two of them they have told me that in specie transfer is not possible: the M&G funds will have to be sold and I will have to wait until II receives the proceeds before I can reinvest them.

M&G say that they now have no dirty units. All the units in their funds are now clean. The differences between the classes seem to be who is allowed to hold them and how big the charges are. If I understand correctly, retail investors who invest direct with M&G can only have A and X class units (which carry the highest charges), those who invest through an adviser can have R class units, and only institutions (including platforms like II) can have I class shares (which carry the lowest charges).

Thank you for your mention of "prefunding". I haven't been able to find much information about this online, but I think I understand the concept. Presumably, it means that if a platform like II is instructed to make a switch from a fund with one fund manager to a fund with a different manager it will issue a sell instruction to the first then wait until it receives the proceeds before issuing the buy instruction to the second. Is that correct? What happens if II is instructed to switch between two funds under the same manager?

Am I correct in thinking that, even if I could get M&G funds transferred in specie to a platform, if I were then to switch to a fund with a different manager there would inevitably be a delay while I was out of the market? If so, there is going to be an "out of the market" risk whatever route I follow. I suppose that if there are several funds to transfer I could slightly reduce the risk by transferring in two or more batches (although, of course, the result could be worse!).

dunstonh

II have made the choice not to accept bundled funds. Some platforms will, some wont.

Inspecie and re-registration are the same thing.

those who invest through an adviser can have R class units, and only institutions (including platforms like II) can have I class shares (which carry the lowest charges).

I dont recall seeing class R. Maybe it was only advised clients who invested direct with M&G. The adviser platforms used class A,I & X prior to RDR. Post RDR, class I is used. Although some platforms with rebates still allow the other classes to be used.

Thank you for your mention of "prefunding". I haven't been able to find much information about this online, but I think I understand the concept. Presumably, it means that if a platform like II is instructed to make a switch from a fund with one fund manager to a fund with a different manager it will issue a sell instruction to the first then wait until it receives the proceeds before issuing the buy instruction to the second. Is that correct? What happens if II is instructed to switch between two funds under the same manager?

A prefunding platform will not wait for settlement. It will buy and sell at the next pricing point and will use its own funds to cover the settlement period. Many do it with tax relief on pensions (i.e. not have to wait for the tax relief to arrive) and others also include withdrawals.

No prefunding means you have to wait. Prefunding is useful for frequent traders/regular contributions and is worth several basis points on the charge. However, it is not common on the DIY side or more limited.

Am I correct in thinking that, even if I could get M&G funds transferred in specie to a platform, if I were then to switch to a fund with a different manager there would inevitably be a delay while I was out of the market?

Depends on whether that platform supports conversions or not. If they do support conversions, then you are not out of the market. If they do not, then you will be (assuming no pre-funding).

barneagle

Thanks for all your help.

Is there an easy way of finding out which platforms operate pre-funding?

Am I correct in thinking that, even if I could get M&G funds transferred in specie to a platform, if I were then to switch to a fund with a different manager there would inevitably be a delay while I was out of the market?
”Depends on whether that platform supports conversions or not. If they do support conversions, then you are not out of the market. If they do not, then you will be (assuming no pre-funding).

By conversions do you mean switches from dirty to clean units of the same fund (like you mentioned above)? If so, I understand that there would be no need for any period out of the market. But I don't understand why a subsequent switch to a fund with a different fund manager should not be out of the market if there is no pre-funding. Have I mis-read this?

dunstonh

Is there an easy way of finding out which platforms operate pre-funding?

On the adviser side yes. On the DIY side not unless someone here knows. From past comments, most DIY platforms do little or no pre-funding unless the platform also has an advised side.

By conversions do you mean switches from dirty to clean units of the same fund (like you mentioned above)? If so, I understand that there would be no need for any period out of the market.

Conversions of a share class, once on platform, are not out of the market. It can take a little while but it is painless.

But I don't understand why a subsequent switch to a fund with a different fund manager should not be out of the marke

That would be out of market due to sale/repurchase with settlement periods

barneagle

Thanks again for all your help.