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The cheapest active funds in every major market

01 November 2021

Trustnet highlights the cheapest active strategies investors can buy from the major equity markets around the world.

By Abraham Darwyne,

Senior reporter, Trustnet

One of the most important ways investors can maximise their long-term returns is by keeping charges low and passive funds that track an equity index are one of the most common ways to do this.

However, not all investors want to invest their money through the cheapest passive option typically offered by the likes of Vanguard or BlackRock.

Some might prefer active strategies and are willing to pay a little bit extra for a manager at the helm investing in up-and-coming companies and simply avoiding the declining ones.

For investors who want an active strategy but want to find the cheapest option available, below Trustnet put together a table with the three cheapest active funds investors can buy in every major market, sorted by ongoing charges figures (OCF).

Source: FE Analytics

Please note that the OCF figures were based off the main driver share class in FE Analytics and charges may vary depending on the share class available.

One of the cheapest active funds available to investors looking for global equity exposure was the Majedie International Equity fund, managed by Tom Record. Before joining Majedie’s global equity team, he managed various emerging markets funds at Baillie Gifford.

The fund has a large relative underweight position to the US equity market and a specific mandate where it is not allowed more than 10% of assets invested into US equities.

Record told Trustnet that his investment approach involves little trading and so will usually have a low turnover: trading costs were estimated to be 0.04% last year.

The relatively new fund – launched at the end of 2019 – has its costs subsidised by Majedie for the time being, which is why it offers foundation fess of 0.25%.

The Dimensional International Core Equity fund was the second cheapest actively managed global strategy in the table, with an OCF of 0.28%. The fund is an call-cap fund, but has a bias towards smaller value stocks that are cheap, but crucially that are turning a profit.

A spokesperson from Dimensional said: “Every day our portfolio managers and traders seek to balance costs against expected returns and diversification. We work for the slightest expected gain, as every incremental improvement can add up over time.”

The cheapest actively-managed option for investors looking for UK exposure was the JPM UK Equity Core fund with an OCF of 0.33%.

Managed by JP Morgan’s Christopher Llewelyn, James Illsley, Callum Abbot and Zach Chadwick, the team sticks closely to the FTSE All Share Index, with the aim of both outperforming and reducing sector-level risk.

It takes many small active stock positions and aims to deliver small incremental excess returns that add up over time.

The Dimensional UK Value fund was the second cheapest option for active UK exposure, with an OCF of 0.36%.

The portfolio managers use the same approach as the international fund, except it overweights the deepest value stocks and excludes the highest growth stocks.

Some investors may also want specific exposure to the US equity market. Here the cheapest option was the Baillie Gifford American fund – which also happens to be highest performing strategy in its sector over five years.

Managed by Gary Robinson, Tom Slater, Kirsty Gibson and Dave Bujnowski, the managers follow Baillie Gifford’s long-term, benchmark-agnostic investment approach of picking “exceptional growth” companies in America.

Baillie Gifford-managed funds were also among the cheapest options for active exposure in Europe, Japan and Emerging Markets.

The FP Carmignac European Leaders fund was the cheapest active option in Europe. Managed by FE fundinfo Alpha Manager Mark Denham, the fund follows a quality-growth approach to investing.

Although some have shunned Europe, Denham said European equities are “often misunderstood” by most investors due to the political noise and economic events on the continent.

In Japan, the only active fund that could match Baillie Gifford’s cheap offerings was the Lindsell Train Japanese Equity fund with charges 0.71%.

Renowned stock picker Michael Lindsell runs a concentrated portfolio of what he deems to be “exceptional businesses”, and aims for a low turnover.

When it comes to emerging markets, which is the most expensive region for UK investors, the M&G Global Emerging Markets fund was the only fund to beat Baillie Gifford’s range of cheap actively-managed options.

The managers Michael Bourke and Alice de Charmoy are active stock pickers, looking for companies across emerging markets that are undervalued by the market relative to their long-term prospects.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.