Virgin Money’s FTSE All Share tracker has failed to land net inflows in Isa season despite dropping its notoriously expensive 1% fee.
Investors have pulled £27.2m from the £2.8bn Virgin UK Index Tracking Trust in the first four months this year, according to Morningstar data.
The high street bank cut its ongoing charge to 0.60% on 25 January before the end of the 2018/2019 Isa season. However, the tracker still suffered net outflows of £6.6m in January, followed by redemptions totalling £5.5m and £5.6m respectively in March and April.
“The reality is that however much they dressed it up, it is still an expensive product at 0.6%,” said Lang Cat director Mike Barrett. “I just wonder if having highlighted that it was expensive in the first place actually drew a little bit too much attention to the charges and they’ve stimulated people to review their investments.”
Barrett added that the timing of the fees announcement also coincided with poor markets and the “daily horror show” of Brexit.
The fund’s outflows were in line with wider trends in the savings industry with Investment Association retail sales figures for Q1 being described as “the weakest tax year end outcome in memory”.
A history of outflows
However, the passive fund’s sales have been disappointing over a longer time period too.
Virgin Money has suffered net outflows of £113.8m from the fund over the last five years with an average monthly outflow of £1.9m. The tracker has only seen net monthly inflows 17 times over the period.
Morningstar associate director for passive strategies research Jose Garcia-Zarate said it is tempting to apportion full blame for outflows on the “ridiculously high” fee, but pointed to the fact Brexit has put a dampener on sentiment.
Garcia-Zarate said: “After all, this is an investment in UK equities, so we cannot ignore the concerns that many investors may have about the impact that Brexit is having, and may continue to have, on a fund that’s invested 100% in UK plc.”
Since the referendum, investors have pulled net £129.7m from the trust. Over that period, it has returned 28.5%.
He said the slash to pricing was welcome but the 0.60% fee remained uncompetitive with rivals that offer the same market exposure for a tenth of the price.
Virgin UK Tracking Trust performance
| 3m | 6m | 1yr | 3yr | 5yr | |
| Virgin UK Index Tracking | 2.85 | 5.20 | -3.28 | 25.20 | 24.62 |
| FTSE All Share | 3.05 | 5.70 | -2.45 | 28.74 | 30.33 |
| IA UK All Companies | 3.68 | 5.78 | -4.16 | 24.26 | 29.24 |
