Morgan Stanley Dean Witter Roils U.K. Fund Market

Morgan Stanley Dean Witter is hoping it shake up the mostly staid British mutual fund marketplace. In late July, the investment giant began an all-out advertising campaign singing the praises of its latest U.K. offering--U.S. -style no-load mutual funds. No-loads are a relatively new phenomenon in Britain.The three actively managed, open-ended funds are being offered to U.K. investors with no front-

Morgan Stanley Dean Witter is hoping it shake up the mostly staid British mutual fund marketplace. In late July, the investment giant began an all-out advertising campaign singing the praises of its latest U.K. offering--U.S. -style no-load mutual funds. No-loads are a relatively new phenomenon in Britain.

The three actively managed, open-ended funds are being offered to U.K. investors with no front- or back-end loads. The funds have annual management fees of 1.6%.

We think its time for a new way of investing in the U.K., and the no-load model is the vehicle to do it, says Richard Brereton, executive director of Morgan Stanley Asset Management in the U.K.

Sales of the funds will be offered direct to the public through telephone and mail solicitation. Most U.K. funds charge an initial 5% load, which is used to pay commissions to financial advisers.

Even though direct-marketed funds have proven successful in the United States, many traditional U.K. fund companies say the no-load model wont work in England.

There is an interest and reliance on financial advisers over here, says Rachel Medill, vice president of M&G, the biggest unit trust company in the U.K. Its how business is done. I dont think this introduction is going to take the market by storm.

Drawing on past history, that may be true. Even Fidelity Investments U.K., which has been in the market for more than two decades, forsakes its U.S. no-load model for the more traditional sales force approach.

However, according to many in the industry, traditions in British savings and investing are starting to fall by the wayside. In the past year, both Schwab and E*TRADE have begun to build businesses in Britain. And the Tradepoint Stock Exchange, the nascent, automated competitor to the London Stock Exchange, has begun to garner some of the market as well.

There are many changes under way in this market and if investors have once before rejected things like no-load funds, it doesnt mean they wont be open to them now, said Alan Line, a director with Foreign & Colonial, a London-based asset manager.

By entering the U.K., Morgan Stanley Dean Witter is following a growing trend among U.S. firms making a presence in European retail markets. However, by creating its own products, the firm is carving a different path than Merrill Lynch, which established its presence in England through its acquisition of Mercury Asset Management.

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