Fund management fees of 1.5% reasonable?

dunstonh

Inv Perp distribution has a bundled TER of 1.57%. Unbundled that is 0.88%.

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.

There are some unbundled DIY platforms but the biggest DIY or most hyped tend to be commission based. Smaller investors do seem to be better off with commission based platforms and the move from bundled to unbundled by iii was handled badly although many on the threads about the iii changes failed to understand that that the changes could result in lower charges (or higher if they were losers on the cross subsidy side).

The DIY market really needs to catch up with the advice market but the FSA has allowed it by saying that DIY can still be paid and keep commissions.

Rollinghome

jem16 wrote: »

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

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.

Perhaps we should avoid muddying the waters. When Robmatic referred to a TER of 0.35% you said: "There is quite a few unit trusts/OEICS with that TER also" (sic) i.e. 0.35%. Was that true?

If so could we have the names? Once we have your list then perhaps we can see what you're actually comparing or just getting muddled with. If you mean unbundled classes where additional fees of some sort would be incurred then it would obviously make sense to make that clear.

I know of one active managed equity OEIC that has a TER of 0.83% but that's a UK, not global, fund (and was available from HL at that price but since the beginning of the year they've put their own additional fee on it).

So sorry, your expectation of me finding other funds that are comparable may be misplaced. Which was why I was interested in your list.

dunstonh

Here are some unbundled prices net of rebate of all commissions (and shown as TER)

F&C Euro Growth & Income 0.77%
F&C Blue 0.79%
F&C Emerg Mkts 0.90%
F&C F&C N America 0.84%
F&C Stewardship International 0.87%

Most single sector managed funds in unbundled form (Either clean or with full rebate) come in around 0.6% to 1.05% TER . 0.8x% to 0 9x% is most common.

JPM Nat res 0.90%
Jupiter European 1.04% (a lof of their funds are expensive in clean form)
M&G global basics 0.90%
M&G Recovery 0.9%
Schroder Asian Income 0.95%
SWIP Global 0.80%
Aberdeen Euro Small Cos 0.89%
Allianz RMC UK Eq Income 0.76%
Baillee Gifford GLobal Alpha 0.71%
Inv Perp High Income 0.94%

jem16

jimjames wrote: »

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.

There are some unbudled platforms available now for DIY, iii being probably one of the most well known through here. It has a full list of its funds rebates on its website. Unfortunately it's not quite fully unbundled as it's not rebating the whole 0.75% in all cases as it's apparently only able to rebate part of the platform fee with Cofunds keeping the rest.

However look what happened with most DIY investors being up in arms about having to pay a fee, except for those that actually realised they were better off with the new charges.

This is what RDR is all about. It's making those charges explicit and clear. Fund houses are having to provide KIDs that clearly state their charges, with on-going charges replacing the TER. Investors will be able to compare the on-going charges for the actual investment. On top of that will be the charge for accessing the investment, be it platform or otherwise. On top of that, if necessary, will be any advice charge.

BLB53

However look what happened with most DIY investors being up in arms about having to pay a fee, except for those that actually realised they were better off with the new charges.

I suspect a lot of the diy investors (myself included) who were 'up in arms' about the introduction of quarterly charges were holding mainly direct shares or investment trusts and who would therefore not benefit from the rebate of commission on OEICS.

jem16

Rollinghome wrote: »

Perhaps we should avoid muddying the waters. When Robmatic referred to a TER of 0.35% you said: "There is quite a few unit trusts/OEICS with that TER also" (sic) i.e. 0.35%. Was that true?

Of course it is true.

However what is not true is that Scottish Mortgage has a TER of 0.35%.

7th May it appears to have a TER of 0.75%.

http://www.investorschronicle.co.uk/2012/05/08/funds-and-etfs/fund-profiles/scottish-mortgage-tops-global-growth-league-8qsBtB6BPgomtDO5cPgf3I/article.html

and 14th March it appears to have been 0.83%.

http://money.aol.co.uk/2012/03/14/5-funds-for-your-isa-scottish-mortgage/

If you mean unbundled classes where additional fees of some sort would be incurred then it would obviously make sense to make that clear.

Posts 9 and 18 by myself made it very clear that I was talking about after RDR and going forward. I am not sure why you would have thought otherwise when you replied in Post 19.

I'm sure you wouldn't be intending to "muddy the waters" by getting muddled with the AMC and TER whilst also ignoring any associated charges involved in buying/holding the IT. However I must admit that I am at a loss to explain how you have managed to do just that.

I know of one active managed equity OEIC that has a TER of 0.83% but that's a UK, not global, fund (and was available from HL at that price but since the beginning of the year they've put their own additional fee on it).

Sorry, I am a little confused and I'm sure you will be able to clarify.

In this post you say;

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. Obviously I'm assuming you’re talking about like for like and not just passive index trackers.

Now you have just asked me to confirm that the TER I was referring to was 0.35% so I think it's fair to assume that you were suggesting that the F&C fund had a TER of 0.35%, which we know is not the case. It is in fact 0.92% which is comparable with the majority of active managed funds, on a like-for-like basis.

Again I would hope that it wasn't an attempt to "muddy the waters" by comparing the unbundled charges of an IT with the bundled charges of a UT/OEIC. This is especially important going forward after RDR and, more importantly after the Platform Review, as it wouldn't be correct to give investors the false impression that ITs are much cheaper than UTs/OEICs.

The Platform Review, although dated for January 2014, may actually come sooner as I can't see fund houses providing 2 sets of differently priced funds (one for the DIY market and one for the advice market) for much longer.

jem16

BLB53 wrote: »

I suspect a lot of the diy investors (myself included) who were 'up in arms' about the introduction of quarterly charges were holding mainly direct shares or investment trusts and who would therefore not benefit from the rebate of commission on OEICS.

Totally agree with that.

However I suspect that what has happened is that those share/IT holders were being indirectly subsidised by the payments that came from the fund houses for managed funds. Now that those subsidies are no longer being allowed, the platform has to make up that lost revenue.

Under RDR rules, all investors have to be treated fairly. The only fair way to do this is to charge everyone the same for accessing the platform.

dunstonh

jem16 wrote: »

Totally agree with that.

However I suspect that what has happened is that those share/IT holders were being indirectly subsidised by the payments that came from the fund houses for managed funds. Now that those subsidies are no longer being allowed, the platform has to make up that lost revenue.

Under RDR rules, all investors have to be treated fairly. The only fair way to do this is to charge everyone the same for accessing the platform.

That is the objective. To remove bias for one type of investment over another. Cross subsidy will have some impact but it shouldnt be a case of commissions on one type cross subsidising non-commission options.

kidmugsy

Doesn't most of the discussion here overlook the point that open-ended funds have to spend money buying and selling shares as money washes in and out of them, whereas closed-ended funds can just sit tight if they want to? Surely that is bound to mean that, comparing like with like, it's more expensive to manage an open-ended fund?