Are You Paying Through the Nose for a 'Closet Tracker'?

How to identify if you're paying for active management but getting passive performance

Emma Simon 3 October, 2014 | 9:55AM
Facebook Twitter LinkedIn

Neil Woodford, the star fund manager who set up his own investment company earlier this year, may be an unlikely standard bearer for low-cost passive funds. In a recent interview he claimed fund managers are paid too much as many are effectively just running ‘closet trackers’.

This is not a new problem. For more than a decade there have been concerns about the number of active managers who stick too closely too their benchmark index, often because a significant deviation could cost them their jobs, and charge a typical fee or around 0.75% for doing so. In contrast, a passive ‘tracker’ fund or ETF—costing as little as 0.1%—will mirror its relevant benchmark far more accurately.

As an active fund manager, Woodford isn’t saying that all investors should be in passive funds. But his words could further fuel sales of these funds. Such comments come at a time when sales of passive funds continue to gain strength, with tracker funds now accounting for 10% of funds under management in the UK.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement