Merryn's Blog

Watch out for big fund managers raising fees

Many fund managers are recognising the arrival of a lower fee environment and cutting their percentage fees as their funds grow. But some big firms are doing the exact opposite.

Last week I wrote a column in which I praised Schroders for jumping on the low-cost fund bandwagon with their new Schroder UK Core Fund an actively-managed unit trust. The fund is to have a total expense ratio (TER) of only 40 basis points, making it about a third of the price of the average fund.

It probably won't be all that good in terms of performance it is benchmarking itself to the FTSE All Share Index but even if it turns out to be a rubbish fund it will at least be much cheaper than the average rubbish fund.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

However, no sooner had I announced my mildly positive feelings towards Schroders, than an email from a financial adviser arrived. He'd had a letter from Schroders about their Asian Total Return Fund. The management fee on this one isn't falling. No, it's rising, from 0.75% to 1% a year.

And the reason for this? To "align" the fee with those of the company's other specialist funds. That doesn't seem to me to be a particularly good reason to raise the price of something by 33%. It doesn't to the adviser either.

Advertisement - Article continues below

Companies such as Schroders, he says in his own letter to them, should not be in the business of launching funds with low-ish fees and then ramping them up the second the fund is large enough to make it worthwhile.

He also points to the fact that many firms are now doing the opposite. They are recognising the arrival of a lower fee environment and cutting their percentage fees as their funds grow. Shame the big companies in the market can't bring themselves to do the same.




The power of mean reversion

When it comes to investing in funds, don’t chase the top performers – look for the cheapest ones.
1 Apr 2019

The most important number to look at before you buy any fund

Many investors get distracted by past performance when they buy a fund. But there’s something else to consider that will have a much bigger influence …
22 Mar 2019

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020
Share tips

Asian income stocks: where to find the continent's top money machines

International dividends shouldn’t only mean companies in the US or Europe – the Far East has plenty of big payouts to offer. Cris Sholto Heaton looks …
6 Feb 2020

Most Popular

Investment strategy

The secret to avoiding being panicked out of your portfolio

With the coronavirus continuing to occupy headlines, investors still aren’t sure how to react. But the one thing you mustn’t do is panic. Tim Price ex…
11 Feb 2020
Silver and other precious metals

You should all own some silver. Just don’t expect it to make you rich

Silver is cool, beautiful and immensely useful. But for investors it's the most frustrating of metals. Dominic Frisby explains why you should own some…
12 Feb 2020
Investment strategy

Just five assets matter for investors. Here's what they are

Every investor’s needs are different – but most can be met by the right combination of five investments
11 Feb 2020

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019