HL Charges

zagfles

george4064 wrote: »

There is an option on the HL website that tells you if you hold dirty or clean funds, and if you do hold any dirty funds with clean versions available it will allow you to instruct HL to convert the dirty funds to their clean versions.

Login to HL > Click on your chosen account (in this case your OH's SIPP) > Account Administration > (at bottom right of this screen) Convert my funds to new unit types

Unfortunately I dont hold funds with HL anymore (only hold stocks, ITs and ETFs), otherwise I would tell you exactly where the dirty to clean option is in the HL website!

If you go into the trading screen for the units, there's an option to convert. It can take up to 3 months, but you're not out of the market at all during the process.

george4064

zagfles wrote: »

If you go into the trading screen for the units, there's an option to convert. It can take up to 3 months, but you're not out of the market at all during the process.

Yep, thats my understanding of the process too.

HL seem to do a bulk conversion for all clients who have instructed to convert every quarter.

bowlhead99

zagfles wrote: »

On the HL website the Class A units have an 1.92% OCF and a 0.75% loyalty bonus. Net 1.17%

The Class D1 has 1.17% OCF and 0.27% discount at HL. Net 0.9%

On the Cavendish site it shows 1.17% OCF and no mention of any discount/loyalty bonus. So net 1.17%

So HL are 0.27% cheaper for these units than Cavendish. HL's platform charge seems to be 0.15% more than Cavendish (they have 0.25% "service fee" plus 0.05% "Cavendish ongoing charge" compared to 0.45% at HL), so (shock horror to those who say HL are "expensive") HL are cheaper than Cavendish for these units by 0.12% !!

Yes, HL appears to be cheaper in this arrangement. I was curious about how they did it so had a look at the accounts/ prospectus.

Ignoring the obsolete bundled class which some people haven't moved out of yet, most investors on a typical platform would use the clean class D.

Class D has management fee of 1% and some other ongoing running costs which take it up to an OCF of 1.17. So HL's published savings are stated against that level of OCF.

The manager's prospectus mentions that they can also issue a D I version of the units at their discretion, with a minimum initial subscription and ongoing balance of £50m (which stops all fund platforms demanding it). In practice at the last set of accounts they didn't have anywhere near £50m of class DI units in issue, but they probably let HL off the minimum given they will have lots of customers on the other legacy classes and as the largest DIY platform are a ripe source of potential new customers.

Basically having some notional £50m minimum investment and saying new units only at our discretion, Blackrock can deny this class to the cheap investor-friendly platforms that don't publish an HL-wealth150-style "best funds in each sector" list with the fund featuring prominently, and the other platforms can't really cry foul, and just have to accept it.

That cheaper class D I has a lower annual management fee of 0.875% compared to the standard class D which is at 1%. So all things being equal (the other components of ongoing OCF usually being generally consistent regardless of class): you would expect the headline savings from being in DI to be only ~0.13%, due to the lower management fee rate. Not a massive saving and you'd expect that you could get a better deal by jumping ship to a place that had lower platform fees even though they can't offer you the exclusive super-clean class...

However, the major component of the OCF other than the management fees (i.e. turning the 1% management fee into 1.17% OCF) is registrar fees - also billed to the fund by a Blackrock entity, and charged at up to 0.15%.

Per the fund's last annual accounts, Blackrock have agreed that for class DI, instead of charging the "up to 0.15%", as they do with A and D, they will charge a flat £15 per unitholder.

This would produce a cost to the D1 share class which is only higher than 0.15% if the unitholders typically have a holding below £10k, and brings down the costs substantially if investors in the class have invested on average say £100k, where the £15s would be 0.015% instead of 0.15%.

Then they could get the discounted management fee plus discounted registrar fee plus 0.02% of other costs to come in at only ~0.9% as an OCF, for class D1. And in that case the total saving gong that route vs the 1.17% OCF on normal class D, is 0.27%.

Even with HL's silly 0.45% platform fee, the saving is not to be sniffed at and may be hard to beat via a platform change, unless you move to a flat fee provider and have a high balance and don't trade.

Given the accounts didn't show a huge NAV for class DI, and loads of HL's investors who are putting cash into BRG&G are going to have under £10k invested - you would perhaps think thatan average £100k per investor is quite unlikely, so the registrar fee saving on this class is not going to be as big as I implied. Perhaps it comes from the fact that the unitholders in Blackrock's register are grouped under, say, HL SIPP Trustee Co or HL ISA Nominee Co, leaving the Blackrock registrars with very little to do because all investor reporting is handled by HL, so the whole class only gets billed £30 for registrar services. This would be a genuine saving from economies of scale and pushing the admin work over to HL.

Or perhaps they have fudged the OCF forecast for class DI, by saying the registrar fee is not NAV based and we don't know the number of investors for the next year in advance, so we will assume we only have 1 investor to keep it all simple (just like a fund with a performance fee always presumes there will be no performance), when in fact we have hundreds of investors attracting registrar fees and will always blow the budget. Hopefully that's not the reason and it is a genuine saving for this class.

cloud_dog

Are you sure you don't have a bit of bloodhound in you? :T

cloud_dog

zagfles wrote: »

You're looking at the net OCF - ie the OCF with the loyalty bonus deducted!

Yes....I'm feeling a bit of a numpty now

And, this individualised (provider) complexity is one of the reason I jumped OIEC ship with the ISAs and moved in to ITs (ETFs).