Watch out for the closet tracker funds in your portfolio

There are a huge number of index tracker funds in the UK masquerading as – and being charged as – actively managed funds, says Merryn Somerset Webb.

The UK fund management industry has a couple of shameful secrets. The first is the way it charges. I've written about this many times before so I won't bore you at length on the matter. I just want to send you in the direction of a new study from Cass Business School, which points out two things.

First is that the worst type of fee structure from the point of view of investors is one in which the manager is paid either a flat percentage of the assets under management, or a flat percentage plus a performance fee.

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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.