ETFs and Fees

diz79

Hi

I have a small understanding of investments but not a lot, I inherited a global fund see below a few years ago. As its global im happy to keep it and maybe start adding money to it, but the fees seem a lot if its 10000 investment the fees work out 170 a year is this good and/or normal? I see vanguard do fee free ones is it worth moving to them, I know jpmorgan is a well known bank. My investment is around 7000, im happy to keep it and possibly put in 50-100 pound a month but the fees seem a lot and im having trouble finding simple ways of comparing different etf fees etc.

https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000OZZX&tab=5

If anyone can help I would really appreciate it, I also understand the markets may change very soon due to the obvious going ons in the world?

Many thanks

dunstonh

As its global im happy to keep it and maybe start adding money to it, but the fees seem a lot if its 10000 investment the fees work out 170 a year is this good and/or normal?

It is 1.7% and using modern disclosure methods, that would be OCF, transaction charges and incidental charges.  Most people only focus on the OCF as the transaction charges/incidental charges figures are flawed or can be misunderstood without context.

It also sounds like it is a direct to fund house holding.  So, no platform charge is involved as its included in the OCF.

 I see vanguard do fee free ones is it worth moving to them,

No they dont.

 and im having trouble finding simple ways of comparing different etf fees etc.

Is it an ETF?  The charge is more in line with a managed OEIC/UT rather than an ETF.

 I also understand the markets may change very soon due to the obvious going ons in the world?

They already have.  And again, and again and again and again.  They are forever changing and there is nothing going on in the world that is unusual or weird when it comes to the markets.

Albermarle

Firstly it is not an ETF …...
It is a open ended fund which is different . The ongoing charge is 1.15% which is pretty typical for an actively managed fund.
I also understand the markets may change very soon due to the obvious going ons in the world?
Well the massed ranks of highly paid financial professionals around the globe , clearly do not agree. If they thought the markets will go down then do you not think that maybe they would be selling and the market would have gone down already ?
Best advice before thinking of making any changes would be to step back and improve your knowledge of investment matters first. You could start here : https://monevator.com/
https://www.amorge.co.uk/investing
https://www.moneysavingexpert.com/savings/investment-beginners/

bowlhead99

It's not an ETF, but an open ended fund.  The basic ongoing charge figure is about 1.1-1.15% for the 'class B' that you hold although you could use a different investment platform and buy the 'class C' at 0.85% OCF instead. There is also a 'transaction charge' quoted which is a measure of the fund's internal costs when it's buying and selling investments, rather than a management fee or fixed operating cost. The internal transaction charges are higher for active funds than they would be for passive tracking funds that follow an index, as the latter are not buying and selling investments very often.

As it is a fund whose manager is making active investment decisions, the measure of whether it has done a good job is probably to look at the overall returns after fees, rather than looking at the gross performance imagining that you could have had the performance by selecting to buy all the individual holdings yourself. 

Over the last decade to today it has done about the same as the FTSE World index, a little better; the B class doesn't quite have ten years of data, but the slightly cheaper C class has returned 206% after fees while the FTSE World index delivered 195%.

FTSE World index only covers 'developed world' while your JPM fund is unconstrained, and if you look an ETF for the MSCI All Companies World Index instead, the return from Blackrock's MSCI ACWI tracker was 177% for the decade. The FTSE World index figure is before any fees - you can't invest directly in the index so would have to use a tracker fund or ETF, which wouldn't be fee free, so after a decade you'd have had a few percent less than the headline figures if you had used a tracker fund or ETF. 

So, on the whole, despite the ongoing charges being over a percent it would have been better for you to hold that JPM fund over the decade and get a return of over 200%, rather than use a global developed world index ETF and get less than 195% or an all-world index ETF and get the 177%.

In looking at that last 10 year performance, actually it did a bit worse than the two indexes over the course of the first 9 years but then more than caught up over the last year. Over the last year, it grew a bit faster than the index in the first few months pre-Covid; then when Covid hit it only lost 20% instead of the World index losing about 25%; and since March it has recovered faster since and grown further, thanks to the mix of various investments it chose to hold.

Past performance can't be taken as a foolproof guide to future performance and of course it is the sort of fund that could potentially lose half its value in pounds over a period of a year or two, so it is not the sort of thing that most people would have as their whole portfolio. If you only hold it because you inherited it, you should probably consider whether it would make more sense to buy something diversified across different types of assets, rather than just generally investing globally in company shares in an unconstrained way, which could concentrate the portfolio in a relatively small handful of companies.

But the bottom line is that you wouldn't have got a better return by using 'a cheap global tracker ETF'; actually you'd have done worse.   Of course, you could think that it only did well because it had a 'lucky year' the last 12 months and happened to be in the right investments at the right time, even if its fans might say it was great skill from the manager. 

I also understand the markets may change very soon due to the obvious going ons in the world

This is always the case. There are always things going on in the world that can cause unexpected results. As long as you know that like most global equity funds it wouldn't be unexpected for a fund like this (or a global 100% equity tracker) to lose over half its value over the course of a year or two - and are comfortable with the risk of that in the context of your overall savings and investments - there is nothing to fear. 

As an example of what can happen in a crash, between summer 2007 and March 2009, the FTSE All-World index lost about 57% in USD terms, which was OK for us in the UK because the dollar strengthened and sterling weakened so every dollar became worth more pounds... but would not have been pleasant if our currency was strengthening instead and foreign assets were becoming worth fewer pounds.

diz79

Ok thanks everyone I do have a very limited understanding of all of this hence why im asking you basic questions. From what I gather the fees are similar for most in this range so no real need to change, I may have saved some but this is always going to be negligible with the way the markets are, I understand its higher risk to hold on its own but I also have some shares with it in a portfolio.

I have one question regarding that if anyone can help, I was looking at moving them away but obviously there is acharge for this, im with equiniti and compushare and the fees for certificated shares to trade is 1.5% for the first 50000. I was looking into moving them to a comission free broker to save money but im finding it hard to find ones that would to it, as far as im aware its free to transfer another broker, but so far the ones ive looked at (freetrade & 212) cannot do it yet si there any comission free brokers you know about where this might be possible? I know 1.5% might not seem a lot but I just thought if theress a way its alwayd worth trying?

I weill look through some of the sites you have put that will help me a lot.

Thanks for all your help, also I have used my phone so apologies if the writing is not clear.

bowlhead99

diz79 said:

 but I also have some shares with it in a portfolio.

I have one question regarding that if anyone can help, I was looking at moving them away but obviously there is acharge for this, im with equiniti and compushare and the fees for certificated shares to trade is 1.5% for the first 50000. I was looking into moving them to a comission free broker to save money but im finding it hard to find ones that would to it, as far as im aware its free to transfer another broker, but so far the ones ive looked at (freetrade & 212) cannot do it yet si there any comission free brokers you know about where this might be possible? I know 1.5% might not seem a lot but I just thought if theress a way its alwayd worth trying?

The ones that charge you nothing to trade are not going to want you to give them all your certificates and the hassle of transferring the records and registrations onto their system just so you can sell the shares for nothing and then walk off with your money and never use them again.

An example of a low cost broker that can take your certificates and dematerialise them into an electronic nominee account, and then let you have online trades for £5.95 per transaction is Jarvis's execution only 'X-O' service, https://www.x-o.co.uk. If you later wanted to transfer out of their system they would charge you £15 per line of stock to transfer away to another broker electronically or the same amount to put the shares back onto a certificate in your own name.