L&G passive fund named and shamed for highest fees

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An L&G passive fund with a 1.43 per cent ongoing charges figure is the most expensive in the UK All Companies sector and 16 times more expensive than the cheapest alternative.

The L&G – (A&L) Capital Growth fund tracks the FTSE 350 and is only available to Alliance & General customers.

A further four funds from Halifax, Virgin and Scottish Widows have OCFs of 1 per cent and account for 12 per cent of all passive assets held in the sector, Square Mile data reveals.

The Halifax funds are the UK FTSE All Share Index Tracker and UK FTSE 100 Index Tracking funds.

The Virgin UK Index Tracking and Scottish Widows UK Tracker round out the top five.

The cheapest funds are from BlackRock, the UK 100 Equity and the UK Equity trackers, and charge 0.06 per cent.

Square Mile points out that if the top five most expensive funds lowered their charges to the standard OCF of 0.3 per cent investors would save £53.4m in fees over one year.

Twelve per cent of passive assets in the sector are invested in five funds with OCFs of 1 per cent or higher.

A Legal & General Investment Management spokesperson says the firm regularly reviews its funds to make sure they represent good value for money.

A spokesman for Virgin Money says it has a single charge on all its tracker funds for clarity and transparency.

Many providers promote what may seem to be low charges, but then have a range of other fees including initial charges, platform charges and exit fees,” he says.

Fund Strategy is yet to hear back from the other companies named in the highest fees list.

Square Mile head of research Victoria Hasler says the five funds would have to increase assets by £15.3bn to generate the same level of revenue if charges were dropped to 0.3 per cent.

“It could be argued that it is not in their interests to cut fees drastically and so it falls to investors to ensure they are invested in the most competitively priced funds.”

Within UK All Companies active funds, around 75 per cent of assets have OCFs between 0.75 per cent and 1 per cent. Only 10 per cent had fees below 0.75 per cent.

Hasler says the asset management industry has faced stiff and some in some cases justified criticism over charges in recent years.

“We believe investors should first consider what outcome they wish to achieve from their investments – whether that’s to grow their savings or draw an income.

“They then should assess which asset managers have the ability to meet their requirements and balance that ability against the charges levied.”