Clean Funds v Dirty Funds

w00519772

Please see the excerpt below:

"
As you may know, Charles Stanley Direct is committed to assisting clients in moving their fund portfolios away from commission-paying ‘bundled’ units into commission-free ‘clean’ units. Conversion to ‘clean’ has the potential to improve the longer-term performance of investments. The Annual Management Charge (AMC) levied by fund management groups on ‘clean’ fund units and classes is usually lower; typically an AMC of 1.5% will reduce to 0.75%.
"

What is the difference between a clean fund and a dirty fund? Can a fund be clean and dirty depending on the investor and what platform they use?

george4064

Below is an example of a clean version and a dirty version of a fund.

Clean version
AMC: 0.75
Loyalty bonus (rebate): 0.00%
Net AMC: 0.75%

Dirty version
AMC: 1.50%
Loyalty bonus (rebate): 0.75%
Net AMC: 0.75%


Loyalty bonuses/rebates are paid as cash to the client. its not uncommon for a clean version's net AMC to be lower than the dirty version's net AMC.

The different versions of a fund for clean and dirty are denoted by their different share classes. Just as an example, below are links for the same fund, with its clean and dirty version;

Clean version: http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/f/fidelity-american-growth-y-accumulation

Dirty version: http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/f/fidelity-american-growth-accumulation-inclusive


If you invested in a fund before 1 March 2014, you would've invested into the dirty version. Since then, platforms allow you to convert your holdings from the dirty to the clean versions. Converting is different from a switch, converting ensures you are never out of the market.

The default version for funds is the clean version, however some platforms do still let you invest in the old dirty version. But I would recommending sticking with the clean versions