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&#39Open up fund TERs to show true costs&#39

Fund research company Fitzrovia is calling for total expense ratios to be used as an indication of true fund costs across the industry as fund firms continue to increase annual charges on Oeics and unit trusts.

Fitzrovia wants investment houses to be more open about their total expense ratios after its research found that annual charges have on average risen in recent years as increasing numbers of product providers have launched funds on to the market.

Between 1997 and 2001, Fitzrovia found that the mean average TER of actively managed funds increased to 1.57 per cent from 1.53 per cent while annual management charges rose to 1.37 per cent from 1.34 per cent.

In purely mainstream investment areas, such as the UK, US, Europe and Japan, average TERs increased to 1.53 per cent in 2001 from 1.5 per cent in 1997 while average AMCs rose to 1.36 per cent from 1.32 per cent over the same period.

Fitzrovia says it is essential for IFAs and fund managers to be aware of TERs, which consist of all operating costs including admin, custody and audit expenses, because of the impact they have on fund performance.

It says fund managers should adjust their performance targets to take into account these charges.

Associate director (communications) Ed Moisson says: “As far as Fitzrovia is concerned, we continue to encourage companies to show their total expense ratios because they are better at demonstrating annual charges to IFAsand fund managers.”

Chase de Vere savings and investment manager Anna Bowes says: “We would welcome anything that makes clear to investors exactly what the charges are.

“But investors need to know what the AMC is separately and understand that higher charges can mean better performance.”


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