Hargreaves Lansdown adds tracker funds to Wealth 150 Plus for the first time
The UK’s biggest fund platform has finally added tracker funds to its select ‘buy’ list of funds. This is the first time that passive tracker funds have been included on Hargreaves Lansdown’s influential Wealth 150, since the list was launched in 2003.
The move appears to be a business decision, with the fund platform stating that the proportion of passive DIY investors has almost doubled in five years, with tracker funds – which track a stock market index - being more popular with younger investors.
It also follows similar moves by rival platforms to include passive fund recommendations alongside ‘best buy’ active funds – which are funds actively managed by a fund manager.
Mark Dampier, head of research at Hargreaves Lansdown says: “We expect a continued polarisation of the UK funds market, with monies flowing into high quality active funds at one end of the spectrum, and low cost passives at the other.”
How the fees stack up
Hargreaves Lansdown claims investors can buy the 13 tracker funds selected for the Wealth 150 from 1 September 2016 more cheaply on its platform than elsewhere. This claim relates to the standard annual ongoing charges figure on the funds, which ranges from 0.06% to 0.23% after the Hargreaves Lansdown discount.
However, investors also need to factor in the annual platform fee for holding funds, which is levied on top of the ongoing charge. Hargreaves is pricier here than other offerings, charging 0.45% of the portfolio each year for the first £250,000 held in funds.
Moneywise’s guide to the best platforms for beginners found that Charles Stanley Direct is the best low-cost all-rounder, charging 0.25%, which is hard to beat for smaller portfolios of between £5,000 and £50,000. Charles Stanley Direct includes eight tracker funds on its Foundation Funds List, with ongoing charges from 0.08% to 0.27%.
Fidelity meanwhile charges 0.35% on fund investments between £7,500 and £250,000 and also has a range of seven ultra-cheap Fidelity branded tracker funds with charges ranging from 0.06% to 0.21%.
If you have investments of £50,000 or more, consider Interactive Investor, Moneywise’s parent company, which is “by far the most cost competitive for larger portfolios”, according to Platforum. Unlike the fund supermarkets mentioned above, it charges a fixed £80 a year, which includes two free trades every three months.
In July, Moneywise selected 20 cheap passives for its First 50 Funds list that you can use to build cheap portfolios. We have also created two starter portfolios that investors can use to boost income or invest for growth.
Below is a list of the tracker funds now included on Hargreaves Lansdown’s Wealth 150 list.
|Annual fund charges|
|Standard ongoing charge||HL saving||Net ongoing charge (for HL clients)|
|BlackRock Corporate Bond Tracker||0.17%||29%||0.12%|
|BlackRock Emerging Markets Equity Tracker||0.25%||8%||0.23%|
|BlackRock Japan Equity Tracker||0.16%||31%||0.11%|
|BlackRock Pacific ex Japan Equity Tracker||0.19%||26%||0.14%|
|HSBC FTSE 250 Index||0.18%||56%||0.08%|
|Legal & General All Stocks Gilt Index Trust||0.15%||33%||0.10%|
|Legal & General All Stocks Index Linked Gilt||0.15%||33%||0.10%|
|Legal & General European Index||0.12%||25%||0.09%|
|Legal & General Global Inflation Lnk Bond Indx||0.27%||37%||0.17%|
|Legal & General International Index Trust||0.13%||38%||0.08%|
|Legal & General UK 100 Index||0.10%||40%||0.06%|
|Legal & General UK Index||0.10%||40%||0.06%|
|Legal & General US Index||0.10%||40%||0.06%|
|Average HL saving||32%|
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
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%.
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.
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.
Corporate bonds are one of the main ways companies can raise money (the other is by issuing shares) by borrowing from the markets at a fixed rate of interest (the reason why they are also known as “fixed-interest securities”), which is called the “coupon”, paid twice yearly. But the nominal value of the bond – usually £100 – can fluctuate depending on the fortunes of the company and also the economy. However it will repay the original amount on maturity.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).