Fund management fees affect the returns of investors. The higher they are, the bigger hurdle the investment manager has to overcome to produce positive results for those who have entrusted their hard earned money to them.
Sadly, some investment managers aren’t very good at disrupting — and don’t justify the fees they earn for nothing better than mediocre work.
In any other profession, they would have been dismissed for a long time, but it is a fact of investment life that most investors do not vote with their feet and take their money elsewhere. As a result, poor investment performance should not be penalized as it should.
Forward thinking: There are some investment houses that feel their investors and shareholders deserve a better deal
Thankfully, there are some investment houses — and many dynamic boards of investment trusts — that feel their investors and shareholders deserve a better deal.
Especially given the difficult times we all find ourselves in now. Thank God, I say. We – consumers and industry – all need to share the pain around us.
Edinburgh-based investment house Bailey Gifford is leading the charge. In recent weeks, it has reduced the annual fee that applies to investment fund UK Equity Alpha from 0.55 per cent to 0.47 per cent.
It has also reconfigured charges from investment trust US Growth, which means the fund’s net assets (that is, assets less any borrowings) exceed £1 billion, any higher than that figure. The amount will also attract an annual fee of 0.5 per cent. instead of 0.55 percent. Bailey Gifford has enjoyed a rich form of investment in recent years due to her commitment to some of the world’s leading growth stocks.
Trusts such as Scottish Mortgage have resulted in excellent returns – one- and three-year returns of 42 per cent and 148 per cent. Indeed, with assets of £21 billion, Scottish Mortgage is by far the largest investment trust in the country and a constituent of the FTSE100 index. Its annual charge is 0.3 percent.
Bailey Gifford says she has cut fund fees on more than 15 occasions since 2013. Its idea, as noted by Marketing Director James Budden, is that it wants to ‘be as competitive as possible on fees because they are the only element of investment. Returns that can be guaranteed’.
You could argue that Bailey Gifford should be even more generous on fund fees. Yet in reducing fees, it is doing the right thing and its focus on value for money should be appreciated.
It’s not alone – other investment houses like JPMorgan have also shied away.
But there is a large part of the retail investment industry that has done nothing so far. It’s time for them to lower their odds.
While regulatory pontificates, empires have been and are gone
While the regulator raves about helping its ’employees act at speed’, its investigation into the circumstances behind the sudden suspension of investment fund Woodford Equity Income in 2019 cannot slow down. Looks like it was no further than it was 27 months ago.
The Empire has gone and gone since that time, wondering what the Financial Conduct Authority had to do with those involved in this investment debacle.
Speed? Snail speed, more like. For investors who lost money in Woodford, a small ray of light shone last week when law firm Leigh Day said it had started court proceedings against Link, the company responsible for ensuring Woodford equity earnings were complying with all regulations. does (it didn’t)
Although the process will be drawn up — the case may not be heard in court before 2024 — Leigh Day is at least offering investors hope for future compensation. Something (hope) the regulator has failed spectacularly to offer so far.
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