Legal and General slashes passive tracker fund fees
Legal & General has slashed the fees on its passive funds, making them some of the cheapest ways to invest in the stock market.
This year has seen a fierce price war among investment companies' passive funds, with Legal & General Investment Management (LGIM) the latest to announce big cuts to the fees investors have to pay.
LGIM has now cut its charges across almost its entire range of index-tracking funds. In total, the yearly fees on 13 of 16 passively managed funds have plunged by up to 55%.
Here's how the firm's ongoing charges figure (OCF, or yearly fees) for 'I' share classes of its funds will fall as follows (table sorted from lowest to highest OCFs).
|
Tracker fund (unit trust) |
Current OCF |
OCF from 01/11/14 |
Reduction |
|
L&G UK 100 Index |
0.18% |
0.10% |
44% |
|
L&G UK Index |
0.17% |
0.10% |
41% |
|
L&G US Index |
0.18% |
0.10% |
44% |
|
L&G European Index |
0.20% |
0.12% |
40% |
|
L&G Global 100 Index |
0.26% |
0.14% |
46% |
|
L&G International Index |
0.31% |
0.14% |
55% |
|
L&G All Stocks Gilt Index |
0.18% |
0.15% |
17% |
|
L&G All Stocks Index-Linked Gilt Index |
0.18% |
0.15% |
17% |
|
L&G Japan Index |
0.19% |
0.15% |
21% |
|
L&G Short-Dated Sterling Corporate Bond |
0.21% |
0.15% |
29% |
|
L&G Sterling Corporate Bond |
0.19% |
0.15% |
21% |
|
L&G Pacific Index |
0.22% |
0.19% |
14% |
|
L&G Global Inflation-Linked Bond Index |
0.27% |
0.27% |
None |
|
L&G GEM Government Bond (USD) Index |
0.30% |
0.30% |
None |
|
L&G GEM Index |
0.43% |
0.33% |
23% |
|
L&G Global Equity Index |
0.39% |
0.39% |
None |
LGIM now offers six index-tracking funds with ongoing fees below 0.15% a year. These dramatic reductions in passive fees catapult Legal & General to being the UK's league leader in low-charging funds.
Hargreaves Lansdown slashes the fees further
Although these fund fees are now among the most competitive in the country, they apply only to 'nil commission' or 'clean priced' fund units that are solely available via investment platforms and by direct intermediary deals that meet minimum investment criteria.
This means that, in most cases, private investors will have to pay additional investment platform charges on top of LGIM's ongoing fees. Typically, these range from 0.25% to 0.5% a year.
However, investment platform Hargreaves Lansdown has laid down the gauntlet to its competitors by securing an exclusive deal on some L&G funds for its clients. Investors can now buy these four funds with even lower fees via Hargreaves Lansdown's Vantage platform.
|
Index tracker (unit trust) |
HL's OCF |
Other platforms' OCF |
HL reduction |
|
L&G UK 100 Index |
0.06% |
0.10% |
40% |
|
L&G UK Index |
0.06% |
0.10% |
40% |
|
L&G US Index |
0.06% |
0.10% |
40% |
|
L&G European Index |
0.09% |
0.12% |
25% |
As you can see, buying into these four index-tracking unit trusts through the Vantage platform gives investors fee reductions of 25% to 40%. What's more, with ongoing charges as low as 0.06% a year, these are set to become the UK's lowest-priced tracker funds for individual investors.
As a result of these fee cuts, Hargreaves Lansdown now includes no fewer than seven Legal & General funds in its 12-strong 'Core Tracker' list, which cover the lowest-priced tracker funds across various sectors.
|
Hargreaves Lansdown Core Tracker funds |
Fund size |
HL's exclusive OCF |
Other platforms' OCF |
Reduction |
|
Legal & General UK Index |
£4,584m |
0.06% |
0.10% |
40% |
|
Legal & General UK 100 Index Trust |
£265m |
0.06% |
0.10% |
40% |
|
Legal & General US Index |
£2,668m |
0.06% |
0.10% |
40% |
|
Legal & General International Index Trust |
£456m |
0.09% |
0.14% |
36% |
|
Legal & General All Stocks Gilt Index Trust |
£745m |
0.10% |
0.15% |
33% |
|
Legal & General All Stocks Index-Linked Gilt Index |
£1,213m |
0.10% |
0.15% |
33% |
|
Legal & General Global Inflation Linked Bond Index |
£76m |
0.17% |
0.27% |
37% |
|
BlackRock Continental Euro Equity Tracker |
£2,650m |
0.12% |
0.17% |
29% |
|
BlackRock Corporate Bond Tracker |
£834m |
0.12% |
0.17% |
29% |
|
BlackRock Japan Equity Tracker |
£754m |
0.12% |
0.17% |
29% |
|
BlackRock Pacific ex Japan Equity Tracker |
£776m |
0.14% |
0.19% |
26% |
|
BlackRock Emerging Markets Equity Tracker |
£785m |
0.25% |
0.27% |
7% |
Once again, buying through Hargreaves Lansdown's platform can mean big savings for investors: in some cases, up to 40% cheaper than going direct to fund providers. However, you should also take any platform management fees into account when you're comparing fees.
Lower fees mean higher returns
When fund managers repeatedly cut their fees, it is individual investors who reap the benefits of these price wars. All other things being equal, such as market returns and tracking error, lower fees directly translate into higher returns for private investors.
So this is great news for investors struggling to cope with low interest rates and chunky fund fees elsewhere. By switching from some of the most expensive trackers, several of which charge yearly fees of 1% or more, investors can immediately and significantly boost their long-term returns.
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