Charges/OCF for F&C Investment Trust

Sally57

I'm a bit confused about the overall charges for holding F&C IT.

Fidelity has quoted me an OCF of 0.79% but I think this includes the transaction costs, however Trustnet have the OCF at 0.65% and Interactive Investor and the AIC at 0.56%.

Who is right or are some platform including transaction costs?

ColdIron

Their factsheet reports an Ongoing charge of 0.65% but refers you to the latest annual report (pages 5 and 41/42). The 0.56% figure looks like what they report as Total expenses

• Our Total Costs ratio fell from 1.06% to 1.01% for 2018 while our Ongoing Charges figure, which is more forward looking, declined from 0.79% to 0.65%.

Both documents can be found here
https://www.bmogam.com/fandc-investment-trust/documents/

dunstonh

OCF is 0.65%.
Ongoing Cost Ex-Ante 1.00%
Transaction Cost Ex-Ante 0.18%
Incidental Cost Ex-Ante 0.00%

Snapshot dates will account for small variances. That is from FE. FE power Trustnet. So, your trustnet data should show the above. FE also supply the cost data to most of the platforms.

Transaction cost Ex-Ante is your real total costs figure (although flawed) but backward looking.

Who is right or are some platform including transaction costs?

0.65% plus 0.18% = 0.83% which is more forward-looking but may not end up being that figure.

bowlhead99

Sally57 wrote: »

I'm a bit confused about the overall charges for holding F&C IT.

Fidelity has quoted me an OCF of 0.79% but I think this includes the transaction costs, however Trustnet have the OCF at 0.65% and Interactive Investor and the AIC at 0.56%.

Who is right or are some platform including transaction costs?

The AIC figure of 0.56% is the latest published total expense ratio (the expense lines in their profit and loss account for 2018, divided by the average daily NAV)

The Trustnet OCF of 0.65% agrees to what they disclosed in their annual report for 2018 which were published last month. An OCF is a forward looking projection of ongoing charges (doesn't include one offs), including certain easily-identifiable costs to which they are exposed within other funds (including for example the private equity funds through which they carry out that part of the strategy).

The OCF of 0.79 is what their declared OCF was in their 2016 and 2017 accounts, which has been superseded by what they put in their 2018 accounts and 2019 February factsheet, both only published last month so perhaps explains why Fidelity database still has the old figure

None of the 'total expense ratio' (outdated method) or OCF (new industry standard method) include transaction costs or implicit dealing costs (difference between mid market price of what they are going to buy before they place the order, and what they actually pay for it). Those numbers aren't recorded as expense items in their profit and loss account, so don't feed into OCF or TER - because they are instead simply captured in the difference between the price they paid for their acquisitions versus what those holdings are worth now (or what they sold for, if already sold).

According to their most recent annual report, those transaction/implied dealing costs were 0.07% for last year. But Dunstonh mentioned 0.18% ex ante. Effectively the 'ex ante' is the expected normal projection for your anticipated level of business given the actual data you experienced. AFAIK, 'Ex post' is what actually happened when you review it post event on the asset levels you had (ie now looking at the analysis now, of what actually got recorded last year).

The overall actual total cost for last year was about a percent - which is higher than the OCF as it includes the transaction costs mentioned, and an additional 0.25% of average fund value for borrowing costs, and a bit of tax exposure.

The borrowing costs will be several million of interest charges and arrangement fees on their debts (the fund has a couple of hundred million of gearing), but they can't put borrowing costs or taxes into their ongoing charges "forecast" (OCF), because they don't know today what borrowing level (if any) they will think is appropriate several months down the line, and they can't assume there will be profits on which to pay unrecoverable taxes.

I agree with Dunstonh that if you want a number to compare with other funds, the logical approach to take is the OCF and add to it some projection for the level of transaction costs, but you might be sceptical that the transaction cost data is a reliable and comparable measure across different types of funds, especially if the funds have different strategies and invest in different areas using different methods.

I try to look past transaction costs unless they are at a really high level with no reasonable explanation. Effectively the manager can't prevent the transaction costs (implicit or explicit) from hitting his final net returns anyway, and I will see his historic net investor returns after all costs as part of my review of historic performance and volatility. Theoretically the point is that if such costs are high due to inefficiencies, kickbacks to brokerage firms or FX providers and excessive churn etc it's worth knowing about them - because those characteristics will prevail even in the years when markets take a dive and you no longer have nice gross returns as a carpet under which the charges can be brushed.

With something like this fund which has an allocation to private equity it's quite reasonable to have transaction costs of 0.1 or 0.2 or 0.3% so I wouldn't really be bothered as long as the manager includes them in his reported information somewhere as the regulations day he should. I don't think I've ever bought or sold an investment trust based on reading a TER or OCF on trustnet or AIC or my investment platform website - the fund manager publishes reports with full accounts at least twice a year, and reading a few years of reports and fact sheets will help you understand what they do, how, and what sort of costs they invite to run it.

Reluctantpensioner

OCF 0.79% isn't what Fidelity show on their finder tool; it's 0.65% in the quick summary.
And a more detailed:
Ongoing charge audited (%) 0.65
Ongoing charge with performance fee - estimated (%)0.56
Transaction cost (%)0.18
In the online factsheet. And in the charges section.
Pricing delay?
Fidelity data is all morningstar; you could look there too.
And in the illustration.

Sally57

Reluctantpensioner wrote: »

OCF 0.79% isn't what Fidelity show on their finder tool; it's 0.65% in the quick summary.
And a more detailed:
Ongoing charge audited (%) 0.65
Ongoing charge with performance fee - estimated (%)0.56
Transaction cost (%)0.18
In the online factsheet. And in the charges section.
Pricing delay?
Fidelity data is all morningstar; you could look there too.
And in the illustration.

I have just taken my first UFPLS payment from my Fidelity SIPP and they sent me a list of my investments together with associated costs with my drawdown paperwork. It clearly states the OCF for F&C at 0.79% but as Bowlhead mentioned this could be out of date or based on a previous year but still it does state this 0.79% OCF in my current paperwork.

JohnRo

FCIT PRIPS KID dated 6/11/2018 states

Transaction fees 0.13%

Other ongoing costs 0.99%

Impact of costs each year 1.12%

This total cost takes into account one-off, ongoing and incidental costs.

Frustrating that there is no further detail offered for 'other ongoing costs' in the KID

Of all the various figures in various documents I personally would be inclined to take this one at face value as a working assumption, if for no other reason than it's the higher number.

It's clear that total cost impact is variable even if some elements within are not.