Confused by fees and charges!

jmaddison_2

Can someone please explain exactly how I work out the real cost I will be paying in fees and charges for funds? On the fact sheets I can see different costs and charges listed.

Fund 1
Fund Manager Ongoing Charge: 0.57%
Annual Management Charge: 0.25%
Total Expense Ratio: 0.49%

Fund 2
Fund Manager Ongoing Charge: 0.28%
Annual Management Charge: 0.20%
Total Expense Ratio: 0.34%

Fund 3
Stated Management Fee: 1.30%
Ongoing Charge: 1.42%

Do I add some or all the fees together to get the total for the fund or is one charge the total cost - if so, which one is the total cost?

Also assuming there are no 'initial costs' or 'exit costs', are there any other fees and charges on top of these that would also get taken out of my fund performance?

Thanks if anyone can explain!

grey_gym_sock

ongoing charges are a newer version of total expense ratio. not sure what the differences are, but i think they're pretty similar.

annual management charge is included in OGR / TER.

OGR / TER is the best figure available. however, it omits the dealing costs incurred by the fund.

there's no very good info about dealing costs. you could estimate them from the portfolio turnover rate - if that was available, which it isn't always.

fund managers may be paying inflated dealing costs, in return for which they get other services from the broker. so dealing costs can in effect include hidden extra charges made by the fund manager.

jmaddison_2

Thanks. So for Fund 1, I use the FMOC 0.57% and this includes the AMC of 0.25% and the TER of 0.49%, but Fund 2 I use the TER 0.34% and this includes the FMOC of 0.28% and the ACM of 0.20%?

Confusing, but it looks like you use whichever is the biggest figure from FMOC, AMC, or TER, and assume it includes the other two?

What about Fund 3? Which figure is the total annual fees taken from my fund in this case?

dunstonh

AMC is the old fashioned way of showing charges. It it the lowest as it doesnt include all things.

As information became easier to collate and increased pressure for transparency has occurred, you had the TER. This is the AMC plus a few more things.

More recently, the ongoing fund charge has been developed to replace TER and AMC over time and this includes the greatest range of costs.

They are not added together. effectively, all three include different things with AMC the least and ongoing charge the most.

Ark_Welder

grey_gym_sock wrote: »

there's no very good info about dealing costs. you could estimate them from the portfolio turnover rate - if that was available, which it isn't always.

Long form of the annual reports is required (short versions are next to useless and ought to be banned in this online PDF world of ours). There are sections in the notes that show dealing costs, being an expense that is needed elsewhere for the start and end net assets calculation. PTR can also be calculated data in the notes that show the total values of all sales and purchases made by the fund, and the notes that show the total values of all purchases and redemptions made by investors in the fund. These data also being required to show the start and end net assets.

jmaddison_2

dunstonh wrote: »

AMC is the old fashioned way of showing charges. It it the lowest as it doesnt include all things.

As information became easier to collate and increased pressure for transparency has occurred, you had the TER. This is the AMC plus a few more things.

More recently, the ongoing fund charge has been developed to replace TER and AMC over time and this includes the greatest range of costs.

They are not added together. effectively, all three include different things with AMC the least and ongoing charge the most.

Interesting. Although if the Fund Manager Ongoing Charge is supposed to be the most inclusive, for Fund 2 the TER is higher. It looks like there is no consistency between funds, so if in doubt it is best to assume the highest of any figures shown.

jmaddison_2

I am still in the dark about Fund 3 in my first post.
Stated Management Fee: 1.30%
Ongoing Charge: 1.42%

Do I add these fees together to get the total fees per year (2.72%) or is just one of these the total I will be charged and the other fee is included in it?

Reaper

jmaddison wrote: »

I am still in the dark about Fund 3 in my first post.
Stated Management Fee: 1.30%
Ongoing Charge: 1.42%

Do I add these fees together to get the total fees per year

No, just use Ongoing charge.

As stated above even ongoing charge fails to take into all the costs, in particular those from buying and selling stuff within the fund. This web site will have a stab at estimating those too based on based on what has happened in the past:
http://www.trueandfaircalculator.com/

Of course if the platform you are buying from adds fees it won;t know about those.

jmaddison_2

That website link is very useful thanks!

dunstonh

Although if the Fund Manager Ongoing Charge is supposed to be the most inclusive, for Fund 2 the TER is higher. It looks like there is no consistency between funds, so if in doubt it is best to assume the highest of any figures shown.

I saw that and assumed it was either two different data points or the data source you are using is not pulling through the right figure. (or its not a UT/OEIC but an insured/pension fund).

jmaddison_2

I have checked the funds I was looking at using the trueandfaircalculator.com website posted by Reaper. In some cases the real cost is double (and more!) than the Total Expenses Ratio shown on the fund fact sheets. Most of my funds are reasonable low-costs, but some others have much higher total costs than I knew about.

If stocks go up on average 5-6% per annum over the long haul, but total fees, charges and expenses add up to 2.5% or 3%, then if the investor gets the 2.5-3% remaining that will keep up with inflation. And this is before the investor pays tax. Considering the risk that comes with investing in stocks the longterm returns look a bit low after fees and charges.