Fund management fees of 1.5% reasonable?

Totton

Although the principal advantage of Investment Trusts is often cited as their ability to use gearing rather than the cost of holding the asset.

gadgetmind

ITs are also better for anything with low liquidity plus you get to play the discount/premium game as they fall in and out of favour.

gadgetmind

BTW, Morningstar are doing a bit of an RDR special this week.

http://www.morningstar.co.uk/uk/

They like it and so do I.

SnowMan

gadgetmind wrote: »

BTW, Morningstar are doing a bit of an RDR special this week.

http://www.morningstar.co.uk/uk/

They like it and so do I.

I like RDR (advice and platform versions), and I like the Morningstar RDR special also.

It is good to see RDR covered from the perspective of the investor for a change.

robmatic

dunstonh wrote: »

Although on a like for like basis, ITs tend to have a higher TER. Just look at the clean priced UT/OEICs where a comparable IT exists. Typically, the UT/OEIC is cheaper. Its only when you compare the bundled share class of an UT/OEIC against the unbundled IT that you see a difference.

The problem at the moment for the consumer is where you have to pay an intermediary for access to clean priced unit trusts/OEICs, even when you don't want or need financial advice or 'servicing'. So ultimately the IT will be cheaper for a DIY investor.

And there remains the option of some relatively cheap ITs anyway e.g. Scottish Mortgage has a TER of something like 0.35% and Foreign and Colonial is also cheap if I remember rightly.

kidmugsy

robmatic wrote: »

And there remains the option of some relatively cheap ITs anyway e.g. Scottish Mortgage has a TER of something like 0.35% and Foreign and Colonial is also cheap if I remember rightly.

And if an IT were at a discount to NAV of (for example) 10%, and if its underlying portfolio were yielding, say, 3%, you are effectively getting a discount of 0.3% against its costs, aren't you?

0.35% less 0.3% = 0.05%.

jem16

robmatic wrote: »

The problem at the moment for the consumer is where you have to pay an intermediary for access to clean priced unit trusts/OEICs, even when you don't want or need financial advice or 'servicing'.

Before RDR the cost for accessing the Platform was part of the bundled charge, so appeared to be free. With RDR you will have to pay for accessing the platform explicitly. It's really nothing to do with financial advice or servicing.

So ultimately the IT will be cheaper for a DIY investor.

That will depend on how you buy the IT.

And there remains the option of some relatively cheap ITs anyway e.g. Scottish Mortgage has a TER of something like 0.35% and Foreign and Colonial is also cheap if I remember rightly.

There is quite a few unit trusts/OEICS with that TER also.

What are the other charges associated with an IT?

Rollinghome

jem16 wrote: »

There is quite a few unit trusts/OEICS with that TER also.

What are the other charges associated with an IT?

That’s interesting. F&C is an active managed global equity fund and for the life me I can't think of any comparable UT or OEIC with a TER anything like that. Obviously I'm assuming you’re talking about like for like and not just passive index trackers.

The best I can think of is a UK equity OEIC with a TER a tad below 1% as it doesn't pay any commission though I'd guess there are a few others. If you really know of lots of managed equity UT/OEICs with TERs below 0.5% then I'm sure many here would be interested in your list, including me.

With ITs, investors do need to take into account additional buying costs and stamp duty. Similarly, most UTs (and some OEICs) will have a spread in addition to any initial charge to cover the cost of creating and liquidating units and funds with single pricing will have those costs taken unseen from the return. The costs of trading the assets held within a fund aren't included in the TER and will be potential higher in open-ended funds that have to be expanded and contracted than in ITs.

But getting away from that, the central purpose of RDR wasn't simply to reduce costs but to increase value - by making it more likely that investors got the advice they paid for.

The problem has been that those wanting advice have been more likely to get a sales pitch for the products that pay commission. The commission the product providers paid to IFAs, although paid for by the investor from the product charges, is paid to influence the sale of their most profitable products. Sales commission isn’t paid for the purpose of ensuring objective advice.

The purpose of RDR is to ensure that investors get the genuinely objective advice they’ve been paying for and are entitled to. A second objective is to ensure that investors seeking advice will understand how much they're paying and what they’re entitled to get in return.

Initially, especially as the reform of platforms is some way off, I suspect the difference for those already investing without advice will be small, but we’ll see.

jem16

Rollinghome wrote: »

That’s interesting. F&C is an active managed global equity fund and for the life me I can't think of any comparable UT or OEIC with a TER anything like that.

The F&C IT has on-going charges ( the new name for TER) of 0.92% according to its November 2012 KID.

http://www.fundnets.net/fn_filelibrary//file/uk_re_it_factsheet_fc_fcit.pdf

I expect you could find a few comparable, clean priced UT/OEICs with on-going charges to match.

Obviously I'm assuming you’re talking about like for like

Yes I would hope we're talking like for like too but until people stop comparing unbundled ITs with bundled funds, I don't think we are.

jimjames

jem16 wrote: »

Yes I would hope we're talking like for like too but until people stop comparing unbundled ITs with bundled funds, I don't think we are.

Part of the problem is that most of the comparison seems to be coming from advisers who are able to access the clean funds and unbundled platforms.

For DIY investors we don't yet have that choice as far as I am aware so we can only compare the things we can buy now.