The master funds, initially intended to garner investments from non-Nationwide mutual funds, have underperformed the firm's initial expectations. As a result, the firm has subsidized the funds, rather than capitalizing on the economies of scale the structure is intended to create.
Furthermore, Fund Asset Management, the advisor to the funds, has concluded 'that the prospects for significant future growth in assets of the Funds do not appear to be favorable.'
Nationwide proprietary funds have been limited in their investments in the master funds due to regulations in the Investment Company Act of 1940, which set the level of investments allowed by feeder funds. Eliminating the master-feeder structure will relieve the firm of this constraint.
In addition, the firm will invest in the funds through an unspecified investment product under development, according to the proxy. Nationwide officials were not available for comment at publication time.
The Bond Index Fund, International Index Fund, Mid Cap Index Fund, and Small Index Fund will be advised by Nationwide subsidiary Villanova Capital if the measures are approved.