Illuminating fund fees
When comparing fund costs, investors need to look out for the different figures
Investor factsheets can contain a mix of acronyms, but the most important figure is the OCF – the Ongoing Charges Figure.
The OCF covers the annual management charges on the fund (also known as AMCs), as well as a variety of other operating and administration costs. All regulated funds now must display their OCF. This charge is applied to the total value of your fund, not just your contributions, which makes them a useful way to compare charges between funds.
The OCF supplanted the Total Expense Ratio (TER) in 2012. The TER was broadly similar, but the OCF includes additional research charges. However, neither of these terms include the costs of buying and selling assets within the fund, such as stockbrokers’ commissions, dealing charges and stamp duty.
Transaction costs can vary significantly from fund to fund, partly depending on how frequently the manager buys and sells shares. Since January 2018 fund managers have been obliged to include information on their transactional costs alongside the OCF.
Transaction costs are projected based on previous actual dealing charges and can be a useful way for investors to understand what the additional costs might be. These fund charges won’t include any platform costs, nor initial charges.
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The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.