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%|