Insider blows the whistle on fund management fees

A former fund manager has said that investors are paying far more than they realise for funds, due to hidden costs such as dealing charges, stamp duty and interest on borrowing.

Everyone loves it when an insider spills the beans. And no one has dropped as many as Alan Miller, formerly of New Star Asset Management. He's slammed the fees levied by fund managers as "disgraceful", saying that investors are paying far more than they realise for funds, due to hidden costs such as dealing charges, stamp duty and interest on borrowing.

How much more? Well, the average turnover (the frequency with which a manager sells and buys stocks) on a typical UK unit trust is 57%, estimates Miller. This, says his wealth management firm Spencer-Churchill Miller, means the true cost of investing in an average UK All Companies unit trust comes to 2.8% a year, rather than the oft-quoted total expense ratio (TER) of 1.6%. This is a big deal. Say you invest £10,000 over ten years. Given an annual return of 7%, a fund charging 1.6% would grow to £16,761; but one charging 2.8% would turn into £14,862, a difference of £1,899.

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Jody Clarke

Jody studied at the University of Limerick and was a senior writer for MoneyWeek. Jody is experienced in interviewing, for example digging into the lives of an ex-M15 agent and quirky business owners who have made millions. Jody’s other areas of expertise include advice on funds, stocks and house prices.