60
CHARGES AND FEES
This section looks at the charges and
fees in the IHT product market. There
are two main charges associated
with BPR products: the initial fee and
the annual management charge, as
is common with many investment
products. Fees are also applied
after certain actions or performance
achievements of the manager. The two
most common are the dealing fee and
the performance fee.
Initial charges range from 0.5% to 3.5%
of the subscription costs, and annual
management fees range from 0.5%
to 3.5%. These are quite significant
differences if they are compounded
over long periods of time (and BPR
investments are sold as mid to long
term investments).
One area where we do not have a lot of
data is where fees are being charged
to the (non-AIM) investee companies
- reducing out-of-pocket expenses
for investors, but perhaps inhibiting
the performance of their underlying
investments. Informal research indicates
OVERALL MARKET CHARGES
CHARGES OF NON-AIM PRODUCTS
CHARGES OF AIM PRODUCTS
AMC
Initial fee
AMC
Initial fee
AMC
Initial fee
CHARGES AND FEES
TOTAL TRANSACTION CHARGES
Purchase Deal Fee
Exit Deal Fee
Initial charge
P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13 P14 P15 P16
0
%
1
%
2
%
3
%
4
%
5
%
% charges
There can be some significant
differences, although of course the
cost is not the only criterion when
making an investment decision.
What many investors may not realise
is that some providers also charge
the investee companies – enabling
them to charge lower fees to the
investor, but perhaps impacting on
the investment performance. Some
providers charge a flat fee rather than
a % as an initial fee, which feels like
good value to us. Note - we have not
considered ‘top up’ investments here.
Based on a sample of 16 products that had a range of charges, we assessed the
differences in “transaction costs” when the initial charge, purchase and exit dealing
fees are taken together. Note that the majority of the charges are against the NAV,
but products 2 & 10 are against the initial subscription.
