Toone, who is both a fund manager and head IFA at AFH Wealth Management, thinks expensive funds will find it increasingly difficult to compete with trackers, ETFs and low-cost products.
"Since RDR will outlaw commission-based IFAs, there will be much more of a focus on investment products that didn’t pay a commission in the first place," said Toone.
"ETFs, passive funds, investment trusts and so on are far cheaper than your average actively managed fund, so it’s very likely that these will be in increased demand post January 2013. This, inevitably, will come at the expense of costly funds."
Toone says RDR’s impact on high-cost funds will be compounded by the uncertain outlook for global growth.
"In the good old days when markets were more buoyant, a TER of 2 or 3 per cent didn’t have as much of an effect. However, in this low-growth, low-return environment, I don’t think high TERs are sustainable."
"This is exactly the reason why we’ve put a maximum 1 per cent TER on any of our portfolios at AFH," Toone added.
He highlights multi-manager funds as the products most at risk of falling out of favour with IFAs and private investors.
"The Jupiter Merlin range could particularly struggle," he said. "I’m sure they’d come back with the argument that strong performance warrants a premium, but the days of double-digit returns year-on-year seem to be over."
According to FE Analytics data, the average fund of funds in the unit trust and OEIC universe has a TER of more than 2 per cent. The £1.3bn Jupiter Merlin Growth Portfolio has a TER of 2.63 per cent.
A number of recent FE Trustnet studies have revealed that multi-manager funds generally underperform their single-manager counterparts in the medium- and long-term, with a higher rate of volatility.
However, John Chatfeild-Roberts’ fund is one of the few that has consistently outperformed its sector and benchmark.
Performance of fund vs sector and index over 10-yrs
Source: FE Analytics
"The likes of Schroders, JP Morgan and Fidelity have recently launched a series of low-cost actively managed funds but I’m completely at a loss why some groups continue to launch expensive funds into the market," continued Toone. "I just can’t see there being any demand for them."
"Indeed, Standard Life has actually increased its TERs recently, which I can’t quite believe. Luckily for us the GARS fund hasn’t been affected, which is the only Standard Life we hold anyway."
Toone manages the £51.5m Margetts St Johns Realistic Core fund, which is itself a fund of funds. It has a TER of 1.63 per cent, making it one of the cheapest multi-manager funds in the unit trust and OEIC universe.