Fitz Partners finds trading fee predictions overblown

Calculating valueFund trading fees are well beneath the cost of management fees and come nowhere near to doubling total fund expenses or ongoing charges, proving some predictions to be overstated, research shows. In a study that covers over 800 UK-domiciled funds, fund trading fees were shown to be considerably lower than expected, though their impact remains "significant". The research from Fitz Partners, a London-based research house specialising in fund fees and expenses, shows that emerging market and UK small companies sectors have the highest level of weighted average trading fees at 20 and 23 basis points, respectively, while global equity and North America equity show the lowest at 14 and 13 basis points. Fitz Partners hopes to impact discussions currently taking place in the UK and in Europe around the second Markets in Financial Instruments Directive (MiFID II) on the issue of fund fee disclosures. In the Netherlands and the UK the fund cost discussion has moved to consider the introduction of a new cost measure that adds transaction fees, among other costs, to the ongoing charges figure. Commenting on a recently released discussion paper from the UK Financial Services Consumer Panel on the topic, Sue Lewis, consumer panel chair, said: "It is completely unacceptable that consumers do not know what firms are charging them." Hugues Gillibert, chief executive officer of Fitz Partners, says that visibility should be offered on both trading fees and ongoing charges, despite the fundamental difference between them. He adds: "Trading fees should be measured relative to the fund's return and not in isolation. Has the investment advisor been adding value through his or her trading, and can this be replicated in the future? This is what really matters." ©2014 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.