Understanding Bond Charges

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theshortstack
theshortstack Posts: 76 Forumite
in Savings & investments
Afternoon all,

I'm looking to invest in my first bond fund and wanted to make sure I understand the charges that are being levied to me.

For example, here are the charges that I've been presented with for one fund:
• Initial Charge: 5%
• AMC: 1.25%
• On-Going Charge: 1.36%
• No performance fee

So lets say that I'm going to invest £1000 with this fund.

I'm presuming that I'd need to pay a one off fee of £50 (the initial charge), but what's the difference between the Annual Management Charge and the On-Going charge?

Also, what is a Performance fee? Is it an additional charge levied of the bond performs at a particular level?

Thanks very much for your help

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  • dunstonh
    dunstonh Posts: 116,379 Forumite
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    Why are you paying an initial charge?

    Most distribution channels have no initial charge unless you buy direct from the fund house.
    I'm presuming that I'd need to pay a one off fee of £50 (the initial charge), but what's the difference between the Annual Management Charge and the On-Going charge?

    Annual management charge is on its way out and being replaced with ongoing charge. AMC contains some of the charges. Ongoing charge is more comprehensive in the charges it includes.
    Also, what is a Performance fee? Is it an additional charge levied of the bond performs at a particular level?

    Some investments will pay the management a performance fee. Most dont.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • ColdIron
    ColdIron Posts: 9,052 Forumite
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    A quick look at Barclays Shareholders shows a fee of 0.35% with a minimum charge of £35 pa which is expensive for small holdings. They do quote initial charges with no indication that they are rebated. If Barclays really are charging an initial fee I'd leave immediately, this makes HL look cheap. There is no reason anybody should pay an initial charge in this day and age
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