As Isa season draws to a close next week, investors in the UK are paying investment fund charges that are almost 30% higher than investors in the US, new analysis by Which? Money has found.
In the UK, investment funds that invest in the shares of UK companies have an average annual charge of 1.47%, while those that only invest in large, blue-chip UK companies have an average charge of 1.22%, according to data provider Morningstar.
But in the US, the average charge for funds investing in large blue chip companies in their domestic stock market is just 0.96%, some 21% cheaper than the UK average. If a UK investor wanted to put their money into a fund that invested in the US stock market, they’d encounter average annual charges of 1.54% – which is 60% more than US investors.
Are fund charges eating into your returns? – find out more in our expert guide
Fund charges in other parts of the world
But if British investors feel hard-done by with high charges, spare a thought for investors in other parts of the world. If you’re an Italian investor giving your money to an Italian fund manager to invest in Italian stocks, you’d face an average annual charge of a whopping 2.65% – the highest of the eight regions we looked at.
Second highest were French investors, who faced an average charge of 2.17% to invest in French stocks. Spanish investors pay, on average, 2.03% for funds investing in the Spanish stock market. Funds at these prices are those that Which? would generally advise that UK investors avoid.
See our table below for more on fund charges around the world.
|Fund charges around the world|
|The table shows the average annual cost of funds investing in their domestic stock markets in eight different regions around the world.|
- Large cap equities only
Investment fund charges are too high, Which? says
Which? believes the charges paid by British investors are too high. Despite a unit trust and open ended investment company (Oeic) universe of 3,000 funds, fund charges have been rising over the past decade, even as returns have fallen. The average cost of all the funds on offer to UK private investors currently stands at 1.64%.
The US fund market is often seen as an ideal model for how fund charges operate. Managers have a fiduciary duty to protect investors from excessive fees, and as funds increase their assets under management, many reduce their fees further. We’d like to see the UK replicating this model.