Woodford Investment Management said this move is part of a wider new initiative to be “open and transparent” on costs associated with running an active fund.
From April 1 research costs are being met by the company rather than being deducted from the fund as part of the transaction costs. Woodford pointed out however, that research costs are just a small part of the charges and costs deducted from a fund’s return.
“Woodford believes that investors should not only be aware of all these costs but they should also be able to see the breakdown and total, in an easy-to-find and easy-to-read way,” the firm said in a statement.
It will therefore be disclosing all costs associated with the main fund on its website on with plans to update the figures each month on a rolling 12-month basis.
Woodford IM also noted that ongoing charge figures typically used by fund providers do not reflect other transaction costs that are deducted from a UCITS fund’s return and therefore paid by investors.
He cited the costs of trading shares, commissions paid to brokers, the bid-offer spread and Stamp Duty as examples.
Total costs are influenced by many factors including inflows and outflows, the firm said. They are also in part driven by portfolio turnover rate, which is the measure of how frequently a fund manager buys and sells assets within a fund, it said.
Woodford’s equity income fund has an OCF of 75 basis points, but with the various other costs mentioned the ‘total cost of investing’ is 84 basis points, the firm said.
“We are acutely aware that it is investors’ money, not ours, we are investing,” said Craig Newman, chief executive. “Just as investors deserve to know where their money is invested, they also deserve to know how we have spent their money to make those investments.”
“Ultimately the investment performance, net of all costs, is what investors are interested in,” he continued. “But we also want our investors to be able to see the total costs taken from the fund – how much we have to pay to buy and sell stocks within the portfolio, and how much we have to pay in subsequent taxes, for example. Research costs are a function of our role and we believe it is only right that Woodford, not our investors, pay for it. Only by knowing all the costs will investors be able to make a considered judgment on whether they are getting value from their fund manager or not.”
