With the RDR kicking in this year vendors are required to report “clean” share class fees on top of which fees are due to platforms and advisers, creating more clarity and cutting the cost for investors.
FE Trustnet recently looked at the cheapest funds in the IMA UK Equity Income and IMA Global Equity Income sectors on these new measures. Here we look at the cheapest UK growth funds on the market. All funds are available through Trustnet Direct.
There are numerous trackers available for very low charges, with fees varying from just 0.09 per cent up to 0.51 per cent.
SWIP Foundation Growth charges just 0.09 per cent while the Royal London FTSE 350 Tracker is particularly cheap at 0.12 per cent.
For those looking for mid-cap exposure the HSBC FTSE 250 Index costs just 0.18 per cent while the BlackRock Mid Cap Equity Tracker charges 0.19 per cent.
The cheapest active fund available is the Schroder Prime UK Equity fund, which charges just 0.51 per cent.
This portfolio is managed by Andy Simpson and has performed slightly better than the FTSE All Share over one and five year periods, and almost exactly in line over three.
Performance of fund versus sector and index over 3yrs
Source: FE Analytics
The BlackRock UK Equity fund is available for ongoing charges of 0.52 per cent. Like the Schroder fund, the fund has a low tracking error to the FTSE All Share, in the top-quartile of the sector, meaning it behaves in a similar manner to a tracker and could be one way of getting core explosure to UK equities.
The Dimensional UK Value fund is available for ongoing charges of just 0.54 per cent. It is a so-called “smart beta” fund, buying those stocks that pass its screens of high book value – which means those that are undervalued relative to the value of their assets.
However, in recent years the fund has performed in line with the index, returning 24.64 per cent over three years as the FTSE All Share has made 26.41 per cent.
Performance of fund versus sector and index over 3yrs
Source: FE Analytics
The AXA Framlington UK Mid Cap fund is also extremely cheap, and at 0.55 per cent costs almost exactly the same as the passively-managed BlackRock Mid Cap UK Equity Tracker fund.
Source: FE Analytics
Axa Framlington UK Mid Cap is managed by Chris St John and FE Alpha Manager Nigel Thomas but is only £71m in size.
This is despite returning top quartile returns over one and three year periods – in fact, the fund is the second-best performer in the sector over three.
UK mid caps are controversial at the minute, having sold off in the recent market wobble.
However, some managers, such as FE Alpha Manager David Coombs, suggest this is a buying opportunity and the excess growth of the FTSE 250 will continue for some time to come.
JPM UK Strategic Equity Income is at 0.6 per cent another cheap option in the sector. The fund is an income-focused fund to have fallen foul of its sector requirements and been rehoused in the growth sector for failing to achieve a sufficient yield.
Threadneedle UK Growth also looks cheap at 0.62 per cent. The fund has consistently produced second-quartile returns.
Jupiter UK Special Situations is one of the top-performing funds to come out as cheap, charging just 0.78 per cent but returning top-quartile returns over three and 10 year periods. Ben Whitmore took over the five FE crowned fund in 2006.
For charges of just 0.8 per cent investors can get access to JOHCM UK Opportunities and CF Lindsell Train UK Equity, while Schroder UK Opportunities costs just 0.81 per cent.