Global Small Cap Funds

bowlhead99

Biggles wrote: »

But don't I then just pay admin charges to Aberdeen or Scottish Oriental instead?

In this particular fund, they self select some of their shares but in some regions like asia, they take their exposure by buying into other people's specialist funds (including the two I mentioned).

So simplistically you put £1000 into the F&C fund, and their holdings include £900 of direct stocks and £100 of the Japan and the Oriental fund. The values of those underlying funds go up and down and have fees on the £100 of value taken out of them by their fund managers. But F&C are charging their fee on the £1000 not the £900. So it's double layers of fees. If instead you just bought £900 of a direct investing fund for UK/US/European and and then directly bought £100 of the asian funds, you'd do better from a pure fees perspective.

Of course there is more to life than fees, and you are paying F&C for their skill and effort in determining what international funds to hold in what proportions on top of the direct holdings, so it is 'fair', and those underlying funds might be perfect holdings to have and F&C have not necessarily done a bad job.

The advantage of a fund-of-funds is you get a great diversified exposure on only a small amount of capital (ideal for creating small portfolios for grandkids). The disadvantage is extra layers of fees.