Fidelity cuts index tracker fund fees
Passive investors will see their costs fall even further, as fund manager Fidelity announced it is slashing the charges on its index tracker investment fund range.
From 1 October, investors buying the Fidelity UK trackers through the firm's own Personal Investor platform will pay just 0.06% in fund fees.
The US tracker will cost just 0.07%, Japan 0.1%, Europe (excluding UK) 0.1%, pacific ex Japan 0.13% and emerging markets 0.21%. The global tracker, which includes the UK, will cost 0.13%.
Fees for Fidelity's trackers will also fall for investors on other platforms, though they will remain around 0.01%-0.02% higher than through Personal Investor.
Investment charges have a major bearing on long-term portfolio performance, and low cost tracker funds have been growing in popularity. The Investment Association estimates a record amount of passive investments were sold to retail investors in 2014, rising 44% to £4.9 billion.
The prices cuts are the second from Fidelity in little over a year, after previously reducing investment fees in May 2014.
John Clougherty, head of UK retail at Fidelity Worldwide Investment, said: "There are still too many investors sitting in index funds with high charges, it has been pleasing to see that following our move last year, we have seen the cost of index funds start to come down. With our own range growing in scale, we are able to offer further price reductions for the benefit of UK investors."
However, investors should be mindful that a firm's own fee for its funds is just one of many they face. If buying via a fund platform, they will also have to pay the platform's fees too - and these can vary considerably depending on how big an investor's portfolio is.
Fans of low-cost passive investments may be interested to learn the world's second largest ETF provider Vanguard is looking to launch its own platform for UK investors, according to reports in IFA trade magazine Money Marketing today.
Also known as index funds, tracker funds replicate the performance of a stockmarket index (such as the FTSE All Share Index) so they go up when the index goes up and down when it goes down. They can never return more than the index they track, but nor will they lose more than the index. Also, with no fund manager or expansive research and analysis to pay, tracker funds benefit from having lower charges than actively managed funds, with no initial charge and an annual charge of 0.5%.
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.
An Exchange traded fund is a security that tracks an index or commodity but is traded in the same way as a share on an exchange. ETFs allow investors the convenience of purchasing a broad basket of securities in a single transaction, essentially offering the convenience of a stock with the diversification offered by a pooled fund, such as a unit trust. Investors buying an ETF are basically investing in the performance of an underlying bundle of securities, usually those representing a particular index or sector. They have no front or back-end fees but, because they trade as shares, each ETF purchase will be charged a brokerage commission.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.