Active fund management fees fall by 15%

Sam Slator 09/03/21 in Strategy

Analysis by FundCalibre shows that fees for actively managed equity funds have fallen by more than 15% over the past four years*.

Looking back at ongoing charges figures (OCFs) in 2017 – as far back as the data allows – the average annual charge for actively managed equity funds has fallen by more than 15% from 1.13% to 0.95%*. What’s more, the average annual cost of a newly launched equity fund is now just 0.85%*.

Commenting on the findings, Darius McDermott, managing director of FundCalibre, said: “We’re really pleased to see that the UK fund industry has reacted to the passive threat by cutting fees. The annual costs for investors are now substantially lower than they were even four years ago.

“Recent fee cuts from Baillie Gifford, Matthews Asia, Nomura and M&G are just a few examples of where active managers are now putting pressure on passives.

“More and more managers are now passing on economies of scale to investors. Importantly, they are doing so on some of their most popular and best performing funds.”

Some 70% of FundCalibre’s Elite Rated and Radar equity funds have OCF’s below the average 0.95%**.

The 10 cheapest Elite Rated and Radar equity funds

FundOCF**
Baillie Gifford American0.51%
Baillie Gifford Japanese0.61%
Baillie Gifford Japanese Smaller Companies0.61%
GAM UK Equity Income0.63%
Baillie Gifford Japanese Income Growth0.63%
LF Lindsell Train UK Equity0.65%
M&G Global Dividend0.66%
JOHCM UK Dynamic0.66%
JOHCM UK Equity Income0.67%
M&G Global Listed Infrastructure0.70%

“Post the Retail Distribution Review we have seen a constant downward pressure on fees of open-ended investment funds,” continued Darius.

“The huge competition in the UK funds industry is providing great value and choice for the ordinary investor and the options and costs today are incomparable to 25 years ago, when I first started work in the industry. The FCA deserves a lot of credit for fostering this competitive environment.

“There’s still further to go and we believe costs for active management will continue to fall.”

 

*Source: FE fundinfo, January 2017, 2018, 2019, 2020 and 2021. The data includes IA sector equity funds which qualify for the FundCalibre Fund Management Index
**Source: FE fundinfo, as at 3 March 2021

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.