Fitz Partners identifies turnover costs in UK domiciled portfolios

An apparent loophole in KIID documentation – a lack of turnover rate data – has been plugged by research from Fitz Partners, which has used a US Securities and Exchange Commission method to calculate costs to investors.

The research company said that many investors and their advisers have been frustrated with the lack of data available in Key Investor Information Documents, which make it impossible to estimate the portfolio transaction costs – ultimately paid for by the investor.

Fitz has looked at some 700 equity and bond portfolio turnover rates as part of its research into the issue, using a US SEC method, that has been applied in the US market for over two decades to assist in regulatory disclosure.

The trading fee calculations include trading commissions and tax, as disclosed in funds’ audited accounts, but exclude bid-offer spreads. The costs are measured as a percentage of the funds’ assets.

Hugues Gillibert, Fitz Partners CEO, said that the method would “help UK and European savers and professionals to better measure funds’ level of trading and will allow meaningful comparison with their  US equivalents, which are still globally showing lower levels of fees”.

Equity Funds
Equity FundsAverageMaximum
Portfolio Turnover64.68%705.67%
Trading Fees0.27%2.68%
Source: Fitz Partners

Among the findings of the Fitz research is that bond fund portfolio turnover averages some 200%.

For Equity funds it is far lower, about 65%. However, about 17% of equity funds show turnover in excess of 100%, with a number well over 300%.

In terms of costs, Fitz suggests that trading fees for equity funds add an average of 27 bps to their TERs, while almost a fifth of equity funds would see their TER increase by more than 40 bps.

Of the equity funds studied, 10 were found to be adding a cost of trading commission and tax of some 100 bps.



Close Window
View the Magazine

I also agree to receive editorial emails from InvestmentEurope
I also agree to receive event communications for InvestmentEurope
I also agree to receive other communications emails from InvestmentEurope
I agree to the terms of service *

You need to fill all required fields!