It seems that the inexorable rise in active management charges continues.  Fund data researchers Lipper have published their annual survey of fund management charges and their findings are depressingly familiar.  Total Expense Ratios (TERs) have increased from 1.52% per annum in 2003 to 1.61% last year meaning that the fund managers are taking a bigger cut of a pot which has grown considerably in size.  Would this be tolerated in any other sector?  We do not seem to be showing clothing retailers the same tolerance for profiteering, quite the opposite.  These companies seem not be passing on the benefits of economies of scale.

The liberties taken with charges seem even more iniquitous when you stop to consider that most of these funds are underperforming their relevant index, for example, the FTSE Allshare and many incur huge costs which are not even included in the TER because reporting requirements in the UK allow managers to conceal many of the costs their trusting investors are bearing.  Do remember that many of these funds will have charged 5% on the way in as well.

Thankfully, investors have some choice.  Many will forego the smoke and mirrors of active management and construct their portfolio from low cost index trackers with no, or very low, upfront fees either doing it themselves or finding advisers who have not bought the active funds’ sales pitch.