Estimating Total Charges For Funds

alanq

Mentioned in Saturday's BBC Radio 4 Money Box programme.

The True And Fair Calculator
www.trueandfaircalculator.com

I haven't used yet myself but think it may be worth a look.

Update: Link to the programme. Item starts 12m23s in.
http://www.bbc.co.uk/radio/player/b01sll2h

dunstonh

I tried it using a couple of my funds and it came in with charges about 35% higher than they actually are.

Rollinghome

I tried it with just a couple of funds yesterday and, without cross-checking the PTRs, it seemed to get them right.

Obviously if someone did find an error would be helpful to specify the name and class of the fund and where the error was found.

Should be useful in making people aware of just how much of their returns can be eaten up by charges, especially as fund charges in the UK are one of the highest in the world.

SnowMan

I was looking at that during the week but on a quick try hadn't realised that you clicked on 'choose investment' to pick your fund and it then filled in the charges

It is an excellent development which should be warmly encouraged.

A lot of the calculations are based on the all important Portfolio Turnover Rate (PTR). Without knowing where this data is coming from or which definition it is based on (there are different definitions) it is hard to gauge whether the figures are accurate for any particular fund (that is a criticism of the IMA, the FCA and the financial services industry not this calculator).

Remember that the PTR was the all important measure that shockingly the IMA got removed or tried to remove from standard manager reports (see Monkey with a Pin by Pete Comley for a brilliant section on this). It was also an over-complicated and somewhat illogical measure historically as the UK/EU measure subtracted the sum of redemptions and purchases of units from the sum of sales and purchases of investments. It was also double what you expect although that isn't a problem provided you know that it is double what you expect.

Pete Comley mentions in v2 of his book that the IMA are starting to use the simpler US measure. This calculation in the FCA handbook bizarrely uses the obscure UK/EU method (and it is still 200% if the whole portfolio is bought and sold once a year). Is this FCA handbbok reference a backtracking and new requirement or does this only apply only to specific types of investment vehicle?

Note if the True and Fair figures were based on the FCA definition above of portfolio turnover, then you then have to separately allow for the cost of investors buying into and selling out of the funds. How those inflow/outflow costs are recouped at an individual investor level will depend on whether the fund uses a floating unit price, an initial levy (such as Vanguard) or a bid/offer spread (ignoring initial explicit charges in that bid/offer spread).

Coming back to the calculator I can't find the PTR figures for example for some of the HSBC tracker funds I invest in (the calculator is using zero for some funds such as the HSBC FTSE all share tracker which doesn't seem right) but I can't meaningfully over-ride the defaults. (Edit enhanced disclosure figures for HSBC funds are here)

This post is a bit 'work in progress' from a quick look so if anyone can improve on this that would be great.

Reaper

The calculator looks great to me from a first look. I heard about it from yesterday's Sunday Times which went on to say the IMA (Investment Managers Association) is working on an alternative. They plan to issue a figure for the total costs incurred over the past year. It should start appearing over the next year once they have finished working out the details.

Both are good news though as the IMA is a trade body for fund managers I will reserve judgement until I see what they come up with.