Tracker funds engage in cut-throat price war

A major provider of index-tracking funds slashed its fees this week, as a cut-throat price war continues to push down the cost of passive investing.

A major provider of index-tracker funds slashed its fees this week, as a cut-throat price war continues to push down the cost of passive investing. BlackRock, the world's largest money manager, has reduced the fees on its giant £8.3bn UK Equity Tracker which tracks the FTSE All-Share index from 0.16% to 0.07%. It has also cut the fees for its 100 UK Equity Tracker, which tracks the FTSE 100, by the same amount, and those on its US Equity Tracker and North American Equity Tracker from 0.16% to 0.08%. Fees on the Continental European Equity Tracker have been cut from 0.17% to to 0.1%. These changes will take effect on 11 August.

This means that BlackRock has moved ahead of passive specialist Vanguard, the second-largest firm by assets under management globally, in the race to offer the cheapest UK equity tracker. Vanguard's FTSE All-Share tracker charges 0.08% plus an upfront dilution levy of 0.2% (dilution levies are designed to ensure that dealing costs and transaction taxes are covered by new entrants rather than long-term holders).

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Hector Reid is a freelance writer, editor and content designer for financial companies. He has a Bachelor in Arts from the University of Manchester. Hector shares his expertise in funds and the economy.