So is there further for fees to fall among passive funds? Mr Hynes believes so: “With passive funds the broad index funds are already very competitively priced. But in the more esoteric areas where there’s not as much competition, there probably is room for fees to fall further over time.”
| Fees and charges: Key figures |
0.9975% Article continues after advert Average active fund ongoing charges figure (OCF) 22% Percentage of investors and advisers who would not pay more than 0.75 per cent OCF for an active UK equity fund (Source: FE Trustnet) 89% Percentage of 150 advisers and wealth managers polled by Source who cited costs as one of the top reasons for using ETFs to meet their investment needs over other investment vehicles |
He observes the “Vanguard effect” in the US market as “one to watch” in the UK should ETFs become more widely used here. “If there’s a sector in the US where Vanguard doesn’t have an ETF offering, fees tend to be higher and, as soon as they enter that sector, it tends to drive down fees,” he explains.
The issue of cost remains a central tenet of the active versus passive debate.
Mr Mellor concludes: “Maybe if we see a return to more normal conditions and better returns then fee pressure will be reduced but, at the moment, the focus is firmly there. And it’s firmly on getting the best performance you can for every dollar or pound that you’re spending.”
Ellie Duncan is deputy features editor at Investment Adviser
