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Public believes you pay for quality

The majority of people think that an expensive fund will outperform a

cheap fund, according to NOP Research.

The survey of 966 people commissioned by Norwich Union also shows that

more than half of
people expect a more expensive Isa fund to perform

better than a lower-cost fund. It says 53 per cent believe it is a case of

the more you pay the better the quality.

The research also rev^_eals that only 10 per cent of the population know

that an actively managed Isa costs almost 7 per cent of the investment in

the first year.

Last November, a Money Marketing survey questioned 94 companies offering

Isa funds in the UK smaller companies and European (excluding UK) sectors.

Assuming growth of 7 per cent a year, the fund managers calculated what a

3,000 investment would be worth after char^_ges had been deducted.

For example, investors with Legal & General European Index would be

sitting on a fund of 5,440 after 10 years – the lowest-charging fund in

this sector.

But investors with AIB Govett European growth would not fare as well. Over

the same period their investment would only be worth 4,581 – a difference

of 859, almost 16 per cent.

Norwich Union director of sales & marketing Mark Skinner says: “Why are

investors shackled to these misconceptions? Some companies only see the Cat

standard as a potential threat to profit margins.”


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