Fund costs question
Discussion
Hi,
I'm looking to invest £20,000 into a fund via an ISA. (hope fund is the right term)
The fund i'm looking at is Vanguard Lifestrategy 80% accumulation.
From what i can see, the ongoing charge is 0.22% if is go direct with Vanguard, but also 0.22% if i invest via Hargreaves Lansdown, which i have another investment with, so providing i'm not being fleeced i think keep it in HL.
Are there any other costs that i'm missing?
I presume the ongoing cost is based on my investment value and charged yearly?
Thanks.
I'm looking to invest £20,000 into a fund via an ISA. (hope fund is the right term)
The fund i'm looking at is Vanguard Lifestrategy 80% accumulation.
From what i can see, the ongoing charge is 0.22% if is go direct with Vanguard, but also 0.22% if i invest via Hargreaves Lansdown, which i have another investment with, so providing i'm not being fleeced i think keep it in HL.
Are there any other costs that i'm missing?
I presume the ongoing cost is based on my investment value and charged yearly?
Thanks.
Yeah HL will charge you more to hold it than Vanguard will to run it.
That's just HL's pricing model which doesn't always work well with the super low cost funds like LifeStrategy.
Vanguards own platform is cheap, but if it's this years ISA allowance and if you envisage wanting to hold non-Vanguard funds, you might want to look elsewhere than Vanguard and HL as a platform to use.
That's just HL's pricing model which doesn't always work well with the super low cost funds like LifeStrategy.
Vanguards own platform is cheap, but if it's this years ISA allowance and if you envisage wanting to hold non-Vanguard funds, you might want to look elsewhere than Vanguard and HL as a platform to use.
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hstewie said:
hstewie said: Yeah HL will charge you more to hold it than Vanguard will to run it.
That's just HL's pricing model which doesn't always work well with the super low cost funds like LifeStrategy.
Vanguards own platform is cheap, but if it's this years ISA allowance and if you envisage wanting to hold non-Vanguard funds, you might want to look elsewhere than Vanguard and HL as a platform to use.
Any recommendation as to what platform to use?That's just HL's pricing model which doesn't always work well with the super low cost funds like LifeStrategy.
Vanguards own platform is cheap, but if it's this years ISA allowance and if you envisage wanting to hold non-Vanguard funds, you might want to look elsewhere than Vanguard and HL as a platform to use.
hab1966 said:
Any recommendation as to what platform to use?
Have a look at these:http://www.comparefundplatforms.com/
https://monevator.com/compare-the-brokers/
It does depend what you want to buy and the frequency.
If you literally want to stick £20K in Vanguard in one go I'd say Vanguard are cheap enough as to make no difference.
IWEB are probably the cheapest for that kind of thing but you have to pay a £25 account setup fee.
It is worth pointing out that the 0.22% charge is just the headline.
This fund also has 0.11% annual transaction costs:
https://www.vanguardinvestor.co.uk/content/documen...
If you add Vanguard's 0.15% platform fee this totals 0.48% a year.
With HL's 0.45% platform fee this totals 0.78% a year.
Headline rates are rarely the full picture.
This fund also has 0.11% annual transaction costs:
https://www.vanguardinvestor.co.uk/content/documen...
If you add Vanguard's 0.15% platform fee this totals 0.48% a year.
With HL's 0.45% platform fee this totals 0.78% a year.
Headline rates are rarely the full picture.
I was interested to receive a statement today showing overall costs for calendar year 2018. They came out at 1.16% which was a bit higher than I expected.
0.2% was platform fee so the rest was fund management charges.
Given that my "target" overall cost is "under 1%" I'll have to spend a few minutes some time (when it's raining) to see whether the active managers are earning their corn. For what it's worth, overall performance was 5% down in the year.
This is where Derek Chevalier pops up and says, "It's hard to beat low cost indexation....".
0.2% was platform fee so the rest was fund management charges.
Given that my "target" overall cost is "under 1%" I'll have to spend a few minutes some time (when it's raining) to see whether the active managers are earning their corn. For what it's worth, overall performance was 5% down in the year.
This is where Derek Chevalier pops up and says, "It's hard to beat low cost indexation....".
There has been a recent rule change whereby everyone is required to disclose the entire costs.
All providers that have been only stating the headline price (99.99%) are now bricking it.
Even the likes of Vanguard are being caught out as not being as 'low cost' as the positioned themselves.
I welcome this.
All providers that have been only stating the headline price (99.99%) are now bricking it.
Even the likes of Vanguard are being caught out as not being as 'low cost' as the positioned themselves.
I welcome this.
rockin said:
I was interested to receive a statement today showing overall costs for calendar year 2018. They came out at 1.16% which was a bit higher than I expected.
0.2% was platform fee so the rest was fund management charges.
Given that my "target" overall cost is "under 1%" I'll have to spend a few minutes some time (when it's raining) to see whether the active managers are earning their corn. For what it's worth, overall performance was 5% down in the year.
This is where Derek Chevalier pops up and says, "It's hard to beat low cost indexation....".
I couldn't resist 0.2% was platform fee so the rest was fund management charges.
Given that my "target" overall cost is "under 1%" I'll have to spend a few minutes some time (when it's raining) to see whether the active managers are earning their corn. For what it's worth, overall performance was 5% down in the year.
This is where Derek Chevalier pops up and says, "It's hard to beat low cost indexation....".
The one thing that jumps out is a fall of 5% over the year. When you consider a 50/50 global equity/bond mix was down just over 2% (so call it just around 2.5% inc platform), if one were to measure performance in units of upside in good years vs units of downside in bad years, you would hope your managers have had a storming run in the years prior to 2018.
JulianPH said:
There has been a recent rule change whereby everyone is required to disclose the entire costs.
All providers that have been only stating the headline price (99.99%) are now bricking it.
Even the likes of Vanguard are being caught out as not being as 'low cost' as the positioned themselves.
I welcome this.
Agreed more transparency is a good thing. All providers that have been only stating the headline price (99.99%) are now bricking it.
Even the likes of Vanguard are being caught out as not being as 'low cost' as the positioned themselves.
I welcome this.
I'm not sure why Vanguard's LS range has relatively high transaction costs relative to a (broadly) global equivalent (their 2 global equity trackers I monitor are 0 and 1 bps transaction costs).
JulianPH said:
It is worth pointing out that the 0.22% charge is just the headline.
This fund also has 0.11% annual transaction costs:
This fund also has 0.11% annual transaction costs:
JulianPH said:
There has been a recent rule change whereby everyone is required to disclose the entire costs.
All providers that have been only stating the headline price (99.99%) are now bricking it.
Even the likes of Vanguard are being caught out as not being as 'low cost' as the positioned themselves.
I welcome this.
I am going to risk taking one step/post further down this particular rabbit hole, as we have some well informed contributors here.All providers that have been only stating the headline price (99.99%) are now bricking it.
Even the likes of Vanguard are being caught out as not being as 'low cost' as the positioned themselves.
I welcome this.
The regulatory definition (such as it is) of entire costs doesn’t include what is known as “market impact”. When - as a fund manager - you exit or enter a position that is material compared to underlying market activity, you may move the price of the security you are trading against your interests. You can mitigate this by working a trade with a skilled broker over a period of time such that your activity is less apparent to other market participants. Of course doing this costs a little more in brokerage fees that will ultimately be disclosed as higher transaction costs. A fund manager who wants to buy (say) £50m of Tesco - about 2 days volume - has an interesting choice: they can buy in one hit potentially moving the price from the quoted 250p to 252p with a low execution cost, or they can buy carefully over the course of say 10 days acquiring the shares at a 250p VWAP but paying more in terms of transaction costs.
Whilst the latter course is better for fund investors, many managers nowadays will be under pressure to “minimise transaction fees” so will end up paying more for the position than might have been needed. A classic example of unintended consequences. Well intended but poorly thought through regulatory and media pressure on a simple definition of “costs” may be working against fund investor interests. The investment managers that Julian describes as “bricking it” may have had been acting with good intent - and in their investors interests - by not focussing simply on the explicit component of transaction costs.
Vanguard are investigating creating a SIPP product. Will be interesting to see what their fee will be.
I pay a fixed fee for my SIPP with Alliance Trust so it's not too expensive and gets cheaper percentage wise obviously with the more you invest. The platform is poor though and is currently reporting my Vanguard 80% fund has risen 0% when it's about 11%
I pay a fixed fee for my SIPP with Alliance Trust so it's not too expensive and gets cheaper percentage wise obviously with the more you invest. The platform is poor though and is currently reporting my Vanguard 80% fund has risen 0% when it's about 11%
Derek Chevalier said:
Agreed more transparency is a good thing.
I'm not sure why Vanguard's LS range has relatively high transaction costs relative to a (broadly) global equivalent (their 2 global equity trackers I monitor are 0 and 1 bps transaction costs).
I am equally concerned when I see transaction costs of 0%. If a fund makes transaction there will always be transactions costs (even if this is just from rebalancing). I'm not sure why Vanguard's LS range has relatively high transaction costs relative to a (broadly) global equivalent (their 2 global equity trackers I monitor are 0 and 1 bps transaction costs).
And whilst I understand that emerging markets can have greater costs when compared to developed ones, Vanguard's total costs on this is 1.16%, which is very high.
WindyCommon said:
I am going to risk taking one step/post further down this particular rabbit hole, as we have some well informed contributors here.
The regulatory definition (such as it is) of entire costs doesn’t include what is known as “market impact”. When - as a fund manager - you exit or enter a position that is material compared to underlying market activity, you may move the price of the security you are trading against your interests. You can mitigate this by working a trade with a skilled broker over a period of time such that your activity is less apparent to other market participants. Of course doing this costs a little more in brokerage fees that will ultimately be disclosed as higher transaction costs. A fund manager who wants to buy (say) £50m of Tesco - about 2 days volume - has an interesting choice: they can buy in one hit potentially moving the price from the quoted 250p to 252p with a low execution cost, or they can buy carefully over the course of say 10 days acquiring the shares at a 250p VWAP but paying more in terms of transaction costs.
Whilst the latter course is better for fund investors, many managers nowadays will be under pressure to “minimise transaction fees” so will end up paying more for the position than might have been needed. A classic example of unintended consequences. Well intended but poorly thought through regulatory and media pressure on a simple definition of “costs” may be working against fund investor interests. The investment managers that Julian describes as “bricking it” may have had been acting with good intent - and in their investors interests - by not focussing simply on the explicit component of transaction costs.
Good point, this is also why some funds (such as Fundsmith) have to declare they cannot guarantee daily liquidity. Equally, if they wanted to move out of a stock it would hit the share price quite hard.The regulatory definition (such as it is) of entire costs doesn’t include what is known as “market impact”. When - as a fund manager - you exit or enter a position that is material compared to underlying market activity, you may move the price of the security you are trading against your interests. You can mitigate this by working a trade with a skilled broker over a period of time such that your activity is less apparent to other market participants. Of course doing this costs a little more in brokerage fees that will ultimately be disclosed as higher transaction costs. A fund manager who wants to buy (say) £50m of Tesco - about 2 days volume - has an interesting choice: they can buy in one hit potentially moving the price from the quoted 250p to 252p with a low execution cost, or they can buy carefully over the course of say 10 days acquiring the shares at a 250p VWAP but paying more in terms of transaction costs.
Whilst the latter course is better for fund investors, many managers nowadays will be under pressure to “minimise transaction fees” so will end up paying more for the position than might have been needed. A classic example of unintended consequences. Well intended but poorly thought through regulatory and media pressure on a simple definition of “costs” may be working against fund investor interests. The investment managers that Julian describes as “bricking it” may have had been acting with good intent - and in their investors interests - by not focussing simply on the explicit component of transaction costs.
The investment managers who are privately "bricking it" are the DFMs. We had a client who sacked his DFM (running a protected pension value of several million) and switched to us to save over £100,000 a year in fees!
rustyuk said:
Vanguard are investigating creating a SIPP product. Will be interesting to see what their fee will be.
I pay a fixed fee for my SIPP with Alliance Trust so it's not too expensive and gets cheaper percentage wise obviously with the more you invest. The platform is poor though and is currently reporting my Vanguard 80% fund has risen 0% when it's about 11%
Vanguard have been about to launch a SIPP for several years now! I pay a fixed fee for my SIPP with Alliance Trust so it's not too expensive and gets cheaper percentage wise obviously with the more you invest. The platform is poor though and is currently reporting my Vanguard 80% fund has risen 0% when it's about 11%
WindyCommon said:
JulianPH said:
The investment managers who are privately "bricking it" are the DFMs.
Good. Those DFM’s are long overdue a day of reckoning.The long overdue new disclosure rules are going to be a huge shock for the the clients of anyone overcharging for their services and will also show all the costs in pounds and pence as well as percentages. Every 12 months.
I don't think people will stand for seeing many of these statements before finding an alternative solution at a lower cost.
Maybe take the client for two lunches a year instead of one? And go a little further down the wine list?
Re the impact of large funds moving out of smaller listed trusts, I have a client who runs a system that detects this price action and sits on the other side soaking up some of the supply, hedging it with his own baskets created by mimicking the holdings of the trust and basically arbs the short term NAV discount spike. I suspect that he is consistently the highest performing spread better in the market by an enormous margin.
Re the impact of large funds moving out of smaller listed trusts, I have a client who runs a system that detects this price action and sits on the other side soaking up some of the supply, hedging it with his own baskets created by mimicking the holdings of the trust and basically arbs the short term NAV discount spike. I suspect that he is consistently the highest performing spread better in the market by an enormous margin.
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