From 1 April, research costs will be met by the Woodford Investment Management, rather than being deducted from the CF Woodford Equity Income fund as part of the transaction costs.
This forms part of a new initiative to be open and transparent on all the costs associated with running an actively managed investment fund.
The firm stated that investors should not only be aware of all fund costs, but they should also be able to see the breakdown and total, in an easy-to-find and easy-to-read way. This is why it will be disclosing all costs associated with the Equity Income fund on a single page on its website, with plans to update the figures each month on a rolling 12-month basis.
Currently, the main way investors compare Ucits fund costs is to look at the ongoing charge figure (OCF).
However, the OCF does not reflect other necessary transaction costs that are deducted from a Ucits fund’s return and therefore, ultimately paid by investors; like the costs of trading shares, commissions paid to brokers, the bid-offer spread, or stamp duty.
Total costs for the Equity Income Fund for its first full calendar year in 2015 were:
Performance |
|
Fund performance, net of all costs and charges (C share class) | 16.19% |
Breakdown of costs (% per annum of NAV) |
|
Ongoing charges figure | 0.75% |
Execution costs | 0.02% |
Research costs | 0.02% |
Transaction taxes | 0.03% |
Spread | 0.02% |
Total cost of investing | 0.84% |
Source: Woodford, with costs calculated against average fund size in 2015. Execution costs, research costs, transaction taxes and spread figures are net of dilution adjustment. Performance data is sourced from Morningstar on a total return, net of fees basis and is calculated on starting and ending values of the fund in 2015.
Craig Newman, chief executive at Woodford Investment Management, said ultimately, the investment performance, net of all costs, is what investors are interested in. “But we also want our investors to be able to see the total costs taken from the fund – how much we have to pay to buy and sell stocks within the portfolio, and how much we have to pay in subsequent taxes, for example.
“Only by knowing all the costs will investors be able to make a considered judgment on whether they are getting value from their fund manager or not.”
peter.walker@ft.com
