Meet Britain's Warren Buffetts

Paying a fund manager to look after your money can often mean paying more for lower returns than you'd get from a tracker fund. Unless, that is, you invest with one of the UK's top six fund managers.

Why pay a fund manager more to look after your cash when an index tracker does it better and costs less? That's what legendary investor Warren Buffett asked his shareholders at the annual Berkshire Hathaway meeting two weeks ago. "A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money," said Buffett, said to be worth $52bn. "The gross performance may be reasonably decent, but the fees will eat up a significant percentage of the returns." Research from Bestinvest certainly supports his views. The independent financial adviser has found that less than half of all active funds in the UK have beaten the FTSE All-Share over the past five, ten and 15 years. And over 20 years, just six British managers have beaten their benchmark index.

So why the underperformance? High annual fees don't help. As Conrad de Aenlle says in the International Herald Tribune: "The research that goes into buying stocks visiting companies, talking to their suppliers and customers, poring over earnings statements and balance sheets does not come cheap." Index-tracker funds can charge less as there are no fund managers to pay. Cheap trackers include the FTSE All-Share Tracker from Fidelity, which charges 0.3%, and Legal & General UK Index, which charges 0.52%.

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