Finding Hidden Fund Fees

At Morningstar we firmly believe that transaction costs should be baked into the cost figure given to investors

Christopher J. Traulsen, CFA 29 March, 2017 | 8:10AM

Among the many interesting items in the Financial Conduct Authority’s bracingly good if rather understatedly named Asset Management Market Study Interim Report, aka MS 15/2.2, was a small bit on “risk-free box profits”.

Would you like some risk-free profits? I would

This little gem makes its first appearance on p. 129, as the second bullet point under paragraph 7.23. Quite justly, 7.23 is focused on identifying costs that are “not included in headline rates (such as the OCF [Ongoing Charge Figure]) and so are not as transparent to investors.” The biggest of these hidden costs, understandably occupying the bullet-point of first rank in 7.23, is transaction costs.

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About Author

Christopher J. Traulsen, CFA

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.

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