UK investors are being cheated compared to US ones by being charged 58% more to buy open-end mutual funds, according to a report by the True and Fair campaign (TAFC) published by The Investors’ Chronicle. The report also argues that hidden charges can erode over half of total fund returns after inflation. UK investors receive just 6% of the economies of scale from big funds vs 33% in the USA.
TAFC’s report shows that charges rose by 28% since supposedly “clean” funds, free of commission to advisers, were introduced at the start of 2013.
TAFC is calling for an Office of Fair Trading investigation of the retail investment industry. Telling investors about the Annual Management Charge (AMC) instead of all fees charged is “completely misleading”, because the AMC typically accounts for less than half the total costs of investing. These are not falling but rising.
The AMC on an average fund used to be 1.5%, half to the fund and the other half commission to the advisor or platform which landed the customer. Now buyers are paying an average 1.92%, 0.75% to the fund as before but another 1.13% to the advisor or platform. Moreover administration charges, initial fees, and hidden transaction costs, add another 0.82% in annual costs, so the total cost per year is 2.74%.
Regulatory obstacles keep Britons from investing in US mutual funds, and keep us out of theirs. That is one of the reasons I don’t cover open-end funds (or UK or Canadian investment trusts.) The other reason is that there are too many of them.
The Australian dollar is tipped to strengthen beyond its fresh highs but will be held in check by a resurgent US dollar, currency experts told the Sydney Morning Herald.
The Australian dollar hit 4-mo highs mid-week, after a surge when Reserve Bank of Australia governor Glenn Stevens made upbeat forecasts for Down Under in a speech in Hong Kong. RBA is their central bank.. Now speculators are reducing their net short positions on the Australian dollar, according to data from the US Commodity Futures Trading Commission, meaning they are less negative about its outlook.
Year-to-date, the A$ is up 3% against the greenback. Longer term the US economic recovery may boost the US dollar against the Aussie one. More follows on how we play currencies and other news from Spain, Brazil, Colombia, Norway, Canada, The UK, Israel, India, Ireland, Indonesia, Finland, Australia, Mongolia, and the Netherlands. By sectors we have articles about oil, alternative energy, telecoms, consumer spending, pipelines, natural gas, pharma, medical devices, fish-farms, REITs or yield spinoffs, and waterworks.
*The simple way to play currency trends is to buy closed-end and exchange-traded fund protection. We have two positions in the fund portfolio to protect against dollar strength, UUP, an ETF tracking all foreign currencies based on trade flows; and a specific one for our overweight in Canada, DLR-Toronto, a Canada listed one. We also own a bond fund heavily exposed to Australian government bonds, Aberdeen Asia Pacific Yield, FAX, to cover our currency risk Down Under (because it is not currency hedged and because it is a huge relatively low-cost CEF). For now do not trade these because currency trends are hard to forecast.
