Discount broker Bestinvest says it has identified £6.1bn of UK tracker funds where investors could save money by looking elsewhere, with costs in the sector ranging between 0.15% and 1.5%.
Of FTSE All Share trackers, the £366m Halifax UK FTSE All Share Index Tracker topped the list in terms of annual costs at 1.50%. Legal & General’s mammoth £1.17bn Tracker Trust has an annual cost of 1.15% and the £715m Swip Foundation Growth Fund AMC is 1.13%.
Virgin UK Index Tracking, one of the largest retail index trackers at £2.37bn, also comes under fire with an annual cost of 1.00%.
In contrast, Bestinvest pointed to competitively priced alternatives, such as HSBC FTSE All Share Index Fund and Vanguard FTSE UK Index GBP, which both have annual costs of 0.15% on their commission-free ‘C’ share class (though both may also incur platform or custody charges).
“The market for passive investments in the UK is heating up partially because more advisers are prepared to use them in a post-RDR world where commission bias has disappeared,” said Ben Seager-Scott, Bestinvest’s senior research analyst.
“The emergence of ETFs and the appearance of Vanguard, a major US index player, on the UK scene have also helped fuel a price war among passive providers which is clearly good news for investors. If you want to capture market beta at low cost, rather than seek to outperform there is no need to be paying more than 0.4% per annum in fund fees for a tracker or ETF.
“What our research clearly shows is that despite these strategies being passive, it is still important to be active in your fund selection when choosing an index fund.”
