155000 to invest

dunstonh

Here is a like for like real example using a comparable OEIC against IT.

Invesco Perpetual Asian OEIC vs Invesco AM Asia Trust.

The OEIC has bundled charging of 1.5% p.a. No initial charge other than advice. Unbundled charging is 0.75% AMC but with a 0.96% TER

ITs dont have bundled charging. Only unbundled. The IT has an AMC of 0.75% but ongoing charge of 1.04%. That is higher than the OEIC.
The IT has stamp duty of 0.5% on purchase, the OEIC does not.
The IT will have the same advice charge as the OEIC.
The IT will have dealing charges. Amount will vary but lets say £12.50 per purchase and sale.

So, on the charges front, using this particular fund, the OEIC is cheaper both initially and ongoing. TER on OEIC being 0.96% compared to 1.04% on IT being key like for like example.

Due to their nature, there are differences in the investment strategy. The top 10 holdings of both are similar (e.g. OEIC has Samsung at 7.07% and IT has Samsung at 6.70%). However, they have different reporting dates of a month apart. The OEIC has more up-to-date data. The IT has gearing. OEIC does not.

The OEIC is lower risk than the IT by about 1 grade on a typical risk 1-10 scale.

Performance.

3 months OEIC 5.38% IT: -0.5%
6 months OEIC -3.02% IT: -11.98%
1 year OEIC 4.45% IT -5.31%
3 years OEIC 29.69% IT -23.03%
5 years OEIC 40.74% IT 43.80%

Both launched in 1995. IT was july. So performance since July 95 is:
OEIC 187.88% IT 68.65%

These are the total return figures assuming dividends reinvested with no dealing charges on the IT to reinvest the dividend. The OEIC also assumes bundled pricing as annual cost. Source, FE analytics to 28-08-2012.

When picking a fund, I went to the Asia as alphabetically it was first in the list and Invesco was the first non-focused fund in the list that also had a comparable OEIC. There was no other reason for selection.

doubleJackD

Aegis wrote: »

In other words, if you include like for like advice costs, the difference in price becomes much less significant. This is likely to be even more pronounced post RDR, when clean pricing on UTs/OEICs becomes a requirement rather than just an option, as execution only clients will be able to see the stripped down price of their UT holdings.

i would find it very convincing if the Investors Chronicle ran an article saying UTs were more expensive than ITs - but they didn't.

One thing seems clear though, ITs historically outperform UTs... But IFAs historically haven't recommended ITs because it's outside their remit (and the fact that ITs never paid commission might also be relevant).... And people still think "go onto unbiased.co.uk" is good advice.... sheesh...

jem16

doubleJackD wrote: »

i would find it very convincing if the Investors Chronicle ran an article saying UTs were more expensive than ITs - but they didn't.

That's because UTs are not more expensive than ITs when compared on a like for like basis. This is going to be especially true going forward.