Hargreaves Lansdown adds low cost FTSE trackerUltra-cheap Vanguard funds also now available

05 December 2011

Tracker funds

Investors need to consider price of 'low cost' trackers 

Hargreaves Lansdown is offering a new low cost tracker fund as well as an additional 12 funds from Vanguard, all of which are subject to its recently announced £2 per month platform fee.

Scottish Widow Investment Partnership’s FTSE All Share Index (SWIP Foundation Growth) is open for investment now, with a total expense ratio of just 0.11%. The annual management charge is 0.07%.

Vanguard comes to the masses

Meanwhile, five equity funds, two fixed income funds and five blended index funds from Vanguard have also been added to the platform, carrying total expense ratios ranging from 0.15% to 0.33%, as well as initial charges. Vanguard are well known in the US for offering low-cost investment solutions to retail investors. 

All of the funds are available through Hargreaves Lansdown’s Vantage platform and their may be some consolation to investors concerned by the new monthly fees pushing up the price of traditionally low-cost tracker funds.

Monthly charge applies

The SWIP Foundation Growth tracker, which is not available through any other platform, is offered at a fixed offer price of 100p until 12 December. As with the Vanguard funds, the minimum single investment is £1000 with a minimum monthly investment of £50.

SWIP charges a TER of 1.14% for investors buying the fund directly, so HL is offering a sizeable discount, although investors will still need to consider the impact of the £2 monthly fee, which caused something of a stir when announced last month.

Small investors lose out

For an investor with £1000 in the fund the £24 of monthly fees, combined with the 0.11% TER, would make a rather expensive 2.51% per annum charge on the fund, making it difficult to see any genuine value.

However, if they had £5000 invested then the monthly charges appear less steep, equating to 0.48% of the investment, on top of the low TER, representing far better value.

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