Mutual funds a poor price for UK investors
23 March 2012 UK and US
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UK investors can pay double the price that US investors do for mutual funds, with worse returns due to hidden fees of up to £18.5 billion a year.
Executives at Fidelity Worldwide Investment, Fundsmith LLP and SCM Private LLP told Bloomberg that complicated fee structures make it hard for potential customers to compare products, resulting in a lack of competition in the market.
Research conducted by Ajay Khorana of Citigroup, Henri Servaes of London Business School and Peter Tufano found that equity funds typically cost 2.48 per cent in annual charges in the UK, compared with 1.53 percent in the US.
“In the UK, people are less aware of what they are paying,” said Servaes to Bloomberg. “The disclosures are not as strong as in the U.S.”
UK and European Union regulators have taken notice of the disparity in fund returns, and have already moved to ban some commissions starting next year.
“In what is allegedly a competitive industry, the U.K. funds market, how is it that the average cost of funds has risen over the years rather than fallen?” said Peter Smith, head of investments policy at the FSA. “That’s something we’re going to be thinking about.”
Executives at Fidelity Worldwide Investment, Fundsmith LLP and SCM Private LLP told Bloomberg that complicated fee structures make it hard for potential customers to compare products, resulting in a lack of competition in the market.
Research conducted by Ajay Khorana of Citigroup, Henri Servaes of London Business School and Peter Tufano found that equity funds typically cost 2.48 per cent in annual charges in the UK, compared with 1.53 percent in the US.
“In the UK, people are less aware of what they are paying,” said Servaes to Bloomberg. “The disclosures are not as strong as in the U.S.”
UK and European Union regulators have taken notice of the disparity in fund returns, and have already moved to ban some commissions starting next year.
“In what is allegedly a competitive industry, the U.K. funds market, how is it that the average cost of funds has risen over the years rather than fallen?” said Peter Smith, head of investments policy at the FSA. “That’s something we’re going to be thinking about.”
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