Cover of MoneyWeek magazine issue no 440

What to buy now

19 June 2009 / Issue 440

Our experts go bargain hunting... PLUS:

  • Where to find the best value small-caps
  • America's on the road to hyper-inflation
  • Has 'Bob the Builder' fixed it for Barclays?

Excerpt

At last, a low-cost fund manager

Good news. Vanguard is coming. The US-based, low-cost fund manager is launching in the UK, “confident that they will have the lowest annual management fee in their sector – cheaper than competitor funds and ETFs”.

This matters. The cost of investing in active and passive funds in Britain is high, with the average unit trust charging around 1.5% in management fees alone. And the management fee is only half the story. Think of all the other charges: trading commissions, stamp duty, research, marketing, compliance, accounting, etc.
Then there is the massive bid/offer spread on lots of funds, to say nothing of the spread on the stocks they buy for the funds.

You might think all these costs should be borne by the fund management firm from their fees. They’re not. Instead, they’re taken from the fund’s assets on top of the management fee.

• Read the full editor’s letter here: At last, a low-cost fund manager