Mirror funds are investment funds that are taken out with one product provider and they have the brand of that provider on them but the funds are actually managed by other fund managers. Examples of this type of fund are the Friends First Insight Currency Fund which is managed by Alder Capital; the Irish Life Fidelity China Fund which is managed by Fidelity Investments and the Aviva Ireland BlackRock European Absolute Return Fund which is managed by Blackrock.
In each of the above cases, the outside managers have agreed to run the funds and their investments mirror the actions of their own core funds but under a different charging structure. Generally, investing in a product producers’ own investment fund will incur an annual management charge of between 0.75% and 1.25% per annum. However, if you were to invest in the mirror fund the annual management charge is likely to be between 1.25% and 2.00% per annum.
Mirror funds emerged as trends changed from investing with Insurance companies to investing in Fund Managers directly. Many Insurance companies started to bring mirror funds into their portfolio of funds, so that the consumer would feel they had an abundance of choice by holding their investment or pension portfolio with that insurance company. Although beneficial for the Insurance Company, as you can see from the above example it is not necessarily beneficial to the retail investor.
Product producers will say that the main reason they offer mirror funds is because of the specialist knowledge the outside fund manager provides. This is a good point because an Irish fund manager will not have an in depth knowledge of say, Asian or South American equity markets, without having analysts on the ground. Usually, retail investors in Ireland will not have direct access to the large multi-national fund managers. So, while there may be no advantages to investing in a mirror fund from a cost point of view, mirror funds do provide a vehicle to access niche investment strategies and emerging markets where higher profits [and losses] can be earned.