Fri, 28/03/2014 - 06:24
Fitz Partners has launched a portfolio turnover and trading fees analysis of funds domiciled in the UK.
Since July 2011, when the first Key Investor Information Documents (KIIDs) were published, investment funds’ literature in the UK have not disclosed portfolio turnover rates.
Fitz Partners’ research allows financial advisers, fund selectors and asset managers to find, in one place, levels of funds portfolio turnover as well as related trading fees.
Fitz Partners calculated over 700 equities and bonds portfolio turnover rates using the US Stock Exchange Commission methodology that has been in use in the US for over 20 years. Trading fee calculations include trading commissions and tax as disclosed in the funds’ audited accounts but exclude bid-offer spreads. They are measured as a percentage of the funds’ assets, following the same methodology used for the calculation of any other operating fees provided by Fitz Partners.
Hugues Gillibert, Fitz Partners CEO, says: “We are delighted to bring portfolio turnovers back into light. This is a substantial step towards a more comprehensive fund analysis, not only can portfolio turnover level be compared across UK funds, but more importantly, for the first time, our unique calculation of trading fees will allow fund professionals to get much closer to a true measure of total charge on UK investment funds assets.
“We believe the use of the US methodology will help UK and European savers and professionals to better measure funds’ level of trading and will allow meaningful comparison with their US equivalents which are still globally showing lower level of fees.”
Beyond the individual level of portfolio turnover and transaction costs disclosed for each fund, Fitz Partners’ research exposes the extreme differences that exist in any fund categories when it comes to portfolio activities.
When bond funds’ average portfolio turnover reaches 200 per cent, equity funds on average churn a very ordinary 65 per cent of their portfolio, but around 17 per cent of these funds would show a turnover of over 100 per cent with some funds well over 300 per cent.
More significantly, trading fees for equity funds would add on average an extra 27 basis points to their TERs and just under 20 per cent of the funds from this asset class would see their TER impacted by over 40 basis points.
Fitz Partners’ research shows that around 10 equity funds in review would add an even greater extra accountable one per cent to their total costs simply on trading commissions and related tax.
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