How to Minimise Fund Fees

Active managers in global markets, particularly in the US, have come under increasing pressure to prove that they can justify the higher fees that they charge

Morningstar 30 August, 2017 | 1:06PM

Fees have become a major talking point within the investment community; fuelled by regulation,  increased transparency and weak active fund performance. Active managers in global markets, particularly in the US, have come under increasing pressure to prove that they can justify the higher fees that they charge relative to most cheaper passive options.

This has highlighted the ever-present importance of considering fee structures in the fund selection process and minimising the underlying cost of investment.

Academics promoting passive investing have argued that active managers do a poor job of beating their respective benchmarks. Fees are the most cited reason for this underperformance, with a higher fee structure prompting investors to reconsider the value they are getting. This is usually depicted via the ‘OCF’, ‘TER’ or ‘AMC’ – all various attempts to transparently summarise the total underlying fees, yet not enough attention is directed to the underlying fee structure that derives these figures.

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