Funds with lower charges offer better returns, says Sweden’s AMF

AMF, the Swedish life company that is one of the biggest owners of equity listed on the Nasdaq OMX Nordic Stockholm, says that analysis of fund statistics suggests a correlation between lower charges and better returns.

Equity and balanced funds with lower overall charges, including fees, have on average had better returns than more expensive funds, according to analysis of data from Morningstar, AMF said.

Swedish equity and balanced funds with charges of less than 0.5% have on average performed better over both five and 10 year periods. Over five years they have returned an average of 14% annually, and 12% over 10 years. That is roughly 1% more annually than more expensive funds. Because this difference occurs over several years it has a bigger effect in the long term. For savers the effect is that lower charges result in more return going to themselves, AMF argues.

For global equity funds the differences are not as clear cut, but it is still the case that more expensive funds do not deliver bettter returns.

The biggest differences are noted among balanced funds, where the lower cost ones have delivered 1%-2% more annually, but where the differences in returns on funds over a five year period could be up to 4% annually, between the cheapest funds and those charging more than 1.5% annually.

Anders Oscarsson, chief executive at AMF Fonder, said that the findings “make clear that funds with higher charges do not create greater return, but the opposite.”

AMF has some SEK436bn (€50bn) in AUM on behalf of about 3.8 million customers. It is owned by the Swedish Trade Union Confederation (LO) and the Confederation of Swedish Enterprise.

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