Should you buy cheap tracker funds?

Hargreaves Lansdown has gone some way to redeeming its recent fee rise by launching an ultra-cheap UK All Share tracker fund. But is it as good as it looks? Merryn Somerset Webb investigates.

Last week wasn't a happy one for broker Hargreaves Lansdown (HL). First its shareholders noticed the inadequacy of its arrangements for executive pay. Then its clients noticed that its new monthly platform fees were making what used to be cheap funds not so cheap any more. Neither were impressed. However, this week HL has gone some way to redeeming itself with the launch of an ultra-cheap UK All Share tracker fund.

The fund, created with Scottish Widow Investment Partnership (SWIP), will come with an annual management fee of a mere 0.07% and a total expense ratio (TER) of 0.11%. That's cheap: the average tracker fund charges more like 1%. The SWIP Foundation Growth Tracker, on which the new tracker is based, comes in at 1.14% and even most exchange-traded funds (long admired for their low fees) cost more.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.