Income question about Fidelity monthly income fund

aajax42

smjxm09 wrote: »

Well I have taken the plunge and put in £70,000 worth of maturing cash ISA's into it now for both my wife and I to add to our investments.

I have spent two months looking into this as my criteria was to find a fund that took in ISA's. I also wanted to earn some income now that I have retired. The fund had to be on the lower side of risk. I wanted it to be a fund of multiple funds that spread the risk in different pies and assets and I wanted it to be actively managed with reasonable charges.

The main point is that I don't want high returns as I don't want to suffer large crashes.

H&L seem to have slightly lower fees. Have you chosen to go direct with Fidelity and if so why?

Audaxer

aajax42 wrote: »

H&L seem to have slightly lower fees. Have you chosen to go direct with Fidelity and if so why?

I couldn't see that particular version of the fund on HL - Fidelity Multi Asset Income Fund N-Income Gross
However I'm fairly sure the OCF of 0.88% would be the same wherever you purchase this particular fund. The platform charge for HL is 0.45% so I think it would be more expensive on HL than direct from Fidelity who charge 0.35% platform fee as far as I can see.

jimjames

Audaxer wrote: »

I couldn't see that particular version of the fund on HL - Fidelity Multi Asset Income Fund N-Income Gross
However I'm fairly sure the OCF of 0.88% would be the same wherever you purchase this particular fund. The platform charge for HL is 0.45% so I think it would be more expensive on HL than direct from Fidelity who charge 0.35% platform fee as far as I can see.

If you're using Fidelity it's far cheaper to go via Cavendish rather than direct as you get the rate of 0.25% and the same platform. Also no annual fee for smaller portfolios

Linton

Audaxer wrote: »

I couldn't see that particular version of the fund on HL - Fidelity Multi Asset Income Fund N-Income Gross
However I'm fairly sure the OCF of 0.88% would be the same wherever you purchase this particular fund. The platform charge for HL is 0.45% so I think it would be more expensive on HL than direct from Fidelity who charge 0.35% platform fee as far as I can see.

I think the N class is specific to Fidelity. You should find different classes elsewhere.

The problem with Fidelity on platform charging is that for portfolios below £7.5K there is a minimum charge of £45. Above it's 0.35%, which is odd as it means a £7.5K portfolio is much cheaper than one worth £7499.

jimjames

Linton wrote: »

The problem with Fidelity on platform charging is that for portfolios below £7.5K there is a minimum charge of £45. Above it's 0.35%, which is odd as it means a £7.5K portfolio is much cheaper than one worth £7499.

Unless you go via Cavendish which is flat 0.25%. You can also re-register via Cavendish and get the lower rate

Audaxer

Linton wrote: »

I think the N class is specific to Fidelity. You should find different classes elsewhere.

The problem with Fidelity on platform charging is that for portfolios below £7.5K there is a minimum charge of £45. Above it's 0.35%, which is odd as it means a £7.5K portfolio is much cheaper than one worth £7499.

You can also get that N Gr Inc Class on Trustnet which I think is a 0.25% platform charge capped at £200.
https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=X3F23&univ=O&typeCode=FJSQQ
It has a yield of 4.49% and the Y Inc Gr class also has the same yield but a higher OCF at 1.15%. There is also a Y Inc class also with a 1.15% OCF but only a 3.61% yield. Not sure what all the different classes mean, but the N Gr Inc seems best with the lowest OCF.

Linton

Audaxer wrote: »

You can also get that N Gr Inc Class on Trustnet which I think is a 0.25% platform charge capped at £200.
https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=X3F23&univ=O&typeCode=FJSQQ
It has a yield of 4.49% and the Y Inc Gr class also has the same yield but a higher OCF at 1.15%. There is also a Y Inc class also with a 1.15% OCF but only a 3.61% yield. Not sure what all the different classes mean, but the N Gr Inc seems best with the lowest OCF.

The main Trustnet site is a database of information which will tell you about any (some? most?) of the share classes available anywhere. They also operate "Trustnet Direct", their in-house execution service. As far as I can see its menu of options only offers the Y Class.

Audaxer

Linton wrote: »

The main Trustnet site is a database of information which will tell you about any (some? most?) of the share classes available anywhere. They also operate "Trustnet Direct", their in-house execution service. As far as I can see its menu of options only offers the Y Class.

I had thought that the Trustnet database was part of the Trustnet Direct platform. It does seem to be only the Y class on Trustnet Direct. It has a higher OCF at 1.15% compared to 0.88% for the N Gr Inc class, but the yield is the same at 4.49%, so I assume that the higher OCF will affect the Total Return?

bowlhead99

Audaxer wrote: »

I had thought that the Trustnet database was part of the Trustnet Direct platform.

It is more the other way around. The Trustnet database, like Morningstar, is a big database with lots of fund data.

Trustnet have also in recent years started to offer a retail investor platform selling direct to customers. Like any other retail platform they will offer whatever share classes they can negotiate access to after doing a deal with the fund manager. So, they sell the Y class which is the mainstream clean retail class that you can get from HL or Youinvest or Charles Stanley Direct etc.

Fidelity offer the N class (which has a 0.25% lower management fee) to customers who are coming to them direct on their own platform; they will after all be earning platform fees from them. The Fundsnetwork platform (which Fidelity own) carries this class. If you are with Cavendish you have a cheaper route onto Fundsnetwork than going direct to Fidelity's own branded retail front end but you would still find the N class listed alongside the Y - so assuming they let you buy it, rather than just listing it, it would be the one to get.

It does seem to be only the Y class on Trustnet Direct.

Yes, as Fidelity are not going to give the third party platform operators access to the cheaper discounted class that they offer to their own direct customers unless there is a big pile of cash in it for them.

It has a higher OCF at 1.15% compared to 0.88% for the N Gr Inc class, but the yield is the same at 4.49%, so I assume that the higher OCF will affect the Total Return?

Basically the difference in OCF is driven by a 0.25% difference in management fee. The correct apples-to-apples comparison is 1.13 OCF vs 0.88% OCF (OCF estimate coming from the last year end accounts from last October). If you're looking at 1.15% OCF it is probably a difference in dates.

The yield is the same because they will deliver the management fee differences via a fee waiver mechanism which hits capital rather than changing the taxable profits figure, so in both cases they declare the same net income yield which can be distributed out to investors, but the N-class investors will get a better overall return with more money left in the pot (so more valuable units). You are right you'll feel the difference in overall total return as time goes on, but if they declare the same % distribution yield for the N-class as the Y-class you won't feel it in your monthly cashflow.

It has a yield of 4.49% and the Y Inc Gr class also has the same yield but a higher OCF at 1.15%. There is also a Y Inc class also with a 1.15% OCF but only a 3.61% yield

The difference between Gr and not Gr on a fund that pays interest distributions to investors is that the Gross one pays its income out gross as the name suggests, while the other one makes a standard deduction of 20% to withhold tax at source. £361 a year on a £10k investment is 20% lower than £449.

Historically investors who qualified to get paid gross (like corporate investors or pensions and charities etc, or individuals using ISAs or SIPPs) would buy the Gr one and everyone else would have to buy the net one. If you were using an ISA or SIPP and bought the net one, your platform manager could claim the tax back for you and add it to your account after a delay.

If you were an individual and bought the net one but didn't actually owe 20% tax on your interest receipts (e.g. non tax payer, starting rate of tax for savings income, 40% taxpayer, 45% taxpayer etc) you would sort it out with HMRC at the end of the year to make sure you didn't overpay or underpay tax.

Some platforms would not carry the Gr Inc or Gr Acc versions and so your only option would be to get the net one and have the cashflow delay (though if you were using an ISA or SIPP your ISA manager would be putting the claims through monthly just like you were getting the distributions monthly so your monthly cashflow on the Inc version would be at the £449 level rather than the £361 level, just with some overall offset if you looked at it properly).

Audaxer

On a fund like this do the dividends grow each year like some ITs, which have a long history of increasing dividends? For example if you invested £100k and received dividends amounting to £4,400 now, would you still be receiving roughly the same amount of income in 20 years time, even although the capital value of your holding should have increased quite a bit?