The Investment Management Association has hit back over accusations of hidden fund charges after doing its own analysis into both active and passive funds.
The IMA has analysed the fund accounts of 129 active and passive funds in the UK all companies sector. For the actively managed funds, the transaction costs were 0.31 per cent of average assets, of which two-thirds was accounted for by stamp duty. In tracker funds, transaction costs totalled 0.06 per cent.
The IMA compared the annual difference over a 10-year period to December 2011 between the return on the benchmark and what the investor would have received after charges.
For the tracker funds, the total expense ratio was broadly the same on average as the difference between the benchmark return and the fund return, this means that the transaction accounts for the difference.
For the actively managed funds, the difference between the net fund return and the benchmark return was on average significantly less than the total expense ratio. The transaction costs were more than covered by the investment returns from active management.
IMA chief executive Richard Saunders says: “The figures demonstrate clearly that so-called hidden charges which cost investors billions a year are a complete myth. If the accusation were true, it would show up in the net returns achieved by investors. But there is no sign of it. The accusations of hidden charges do not stand up.”