Of all UK mutual funds that have changed their annual management charges over this period, 80% put them up. The average equity fund increased their AMC by 0.3%.
Ed Moisson, head of UK and cross-border research at Lipper, says there are a number of good reasons for the increase in fees charged including the higher cost of distribution across continental Europe, the growing power of platforms in the UK, more specialised funds laying claim to higher fees, the cost burden of regulation and their desire to increase revenues.
Tellingly, he adds: “But the reason why the industry average has risen is because of the dual process of new funds setting their fees at or above the current average, together with existing funds that change their fees pushing them up (rather than down).”
Looking at the UK, 156 of the 196 funds that had changed their annual management fee over the past decade had moved them upwards. For actively managed equity funds, 121 (or 90%) of the 132 that changed their fee increased them.
This compares with index-tacking funds that largely lowered their fees, with 79% of the 14 included in Lipper’s research doing so. Their reduction averaged 31 basis points, though this is largely skewed by one provider (HSBC) lowering their charging structure on seven of its products to below 1%).
Encouragingly for investors, the trend of rising charges across all asset classes since the beginning of the decade has tapered off with 2009 and 2010 seeing a net lowering of fees against every other year since 2000.
