Luxembourg-domiciled funds have among the most expensive share classes in Europe, while funds in the Nordics have the most attractive charges, research from Morningstar Denmark shows.
In a report, entitled Expenses in Nordic investment funds in a European context, it says investors can benefit from a lower ongoing charge on an asset-weighted basis depending on where in Europe their funds are domiciled.
For example, investors in Luxembourg-domiciled share classes – which collectively hold the most assets in any European domicile – pay among the highest ongoing charges in Europe on an asset-weighted basis.
And investors in Belgian-domiciled share classes pay the most in ongoing charges.
Investors in larger share classes or in funds of larger asset management groups are missing out, too. Morningstar Denmark says cost savings through economies of scale that could be passed to investors vary among the domiciles, and in some domiciles, are not passed along to end investors at all.
Nikolaj Holdt Mikkelsen, chief analyst for Morningstar Denmark and author of the report, says that choice of domicile matters because there are considerable degrees of variation between the average ongoing charges in each of the domiciles surveyed.
An investment of €100,000 and an assumed additional monthly savings rate of €500 for a further ten years – only taking ongoing charges into account – there is a difference of €9,500 in growth between an investor in the cheapest domicile, Norway, and the most expensive domicile, Belgium.
Investors in Norway-domiciled share classes pay an asset-weighted average ongoing charge of 0.72%. This compares to the European average of 1.08% and an average of 1.53% for investors in Belgium-domiciled funds.
Together, the Nordic countries have ongoing charges of 0.98%. On an asset-weighted average, funds domiciled in Sweden and Denmark also offer ongoing charges less than the European average. Finland is the Nordic exception with an asset-weighted average ongoing charge of 1.1%.
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