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Newton chief slams ‘rip-off’ fund charges

Many investment funds are a rip-off, with hidden charges often bringing the total expense ratio to double the stated annual management fee, claims Newton private client director Harry Morgan.

Morgan told Money Marketing Live that this is par- ticularly the case with prop- erty funds, where charges can effectively reach 5 per cent, stripping away much of the investment growth.

He said fund managers should realistically be able to run money for close to 1 per cent for most asset classes. He pointed out that this is not possible with property funds, which as well as the manager’s fees also have to fund the costs of solicitors, valuers and property management. He said the charges levied by many, often in a clandestine fashion, are too high.

Seven Investment Management co-founder and director Justin Urquhart Stewart said the TER, often mooted as a more transparent way of comparing charges, is not infallible as it does not include the cost of the initial charge, funding commission or the impact of bid/offer spreads.

Morgan said: “There are often hidden charges on property funds and TERs do not tell the full story. Some of these trusts are frankly a rip-off and in a low-return environment, it is not sustainable.”

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