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7IM cuts costs on AAP range

7IM is reducing the costs of its AAP passive multi-manager funds by replacing some of the exchanged-traded funds and tracker fund holdings with direct exposure to the underlying shares.

The firm feels it is important to keep costs down in the current climate of low growth to prevent charges eating into investors’ capital. It says the average annual cost of a passive investment is 0.25 per cent but buying a basket of shares to track index performance brings the total expense ratio to zero.

7IM chief Tom Sheridan says the AAP funds needed to be of a sufficient size to make the basket of shares approach possible, with the technology in place to keep the baskets up to date. He says shares cannot be bought and ignored as price movements could result in a stock being 4 per cent of the index one day and 4.1 per cent the next.

Sheridan says there is a trade-off between the number of stocks bought to track an index and tracking error, which is the amount by which a portfolio deviates from the index. He says that the more stocks you buy, the less the tracking error.

7IM will buy all 100 stocks on the FTSE 100 but would not buy all 500 stocks on the S&P 500 because the bigger companies make up a bigger proportion of the index, so holding fewer smaller companies would not have much of an impact in terms of tracking error.


Hoban says Isas don’t face cuts

Treasury financial secretary Mark Hoban has rejected claims that the Government is considering reducing tax incentives on Isas in the forthcoming comprehensive spending review. At the Labour conference in Manchester last week, Treasury select committee member Andy Love warned that the Government may target Isas as part of its package of cuts. He said: “We […]

MM leader: Saving is not a mission for failure

Treasury financial secretary Mark Hoban has rejected Money Marketing’s call for the new regulator to be given a specific objective of increasing saving rates and protection levels. Speaking at the Conservative conference this week, Hoban said MM’s campaign goal would set up the Consumer Protection and MarketsAuthority to fail. We disagree. Giving the CPMA a […]

Setback in Arch Cru liquidation

Arch Cru administrators are understood to be furious after the Channel Islands Stock Exchange froze trading in 11 sub-funds, throwing plans to recover UK investors’ savings into chaos. The suspensions – announced yesterday – have derailed tender processes to sell the funds’ assets off that have been worked on over a number of months. The […]

Stop the cold-calling

Royal London is pleased to support the petition calling for a ban on cold-calling for pension and investment products. The petition, launched by IFA Darren Cooke of Red Circle Financial Planning and hosted on the Parliamentary website, calls on the Government to ban cold-calling for pensions and investment products. A similar ban is already in force […]


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