Nordic domiciled funds cheapest in Europe, says Morningstar

Research into average charges on funds and share classes has found that the Nordic region offers investors the best deal, according to figures published by Morningstar.

According to research published in Expenses in Nordic Investment Funds in a European Context, the region offers investors the ability to make improved returns over time because of the lower charges fund providers offer there.

Among the findings are that investors in Norwegian domiciled share classes pay an asset weighted average ongoing charge of 0.72%, compared to a European average of 1.08%.

Investors in Belgium domiciled funds are worst off, paying an average 1.53% in charges on this basis

The average across the Nordic region is 0.98%, with just Finland having a charge level in line with the European average at 1.10%. The region’s ability to offer lower cost share classes holds across four key asset classes of equity, fixed income, money market and allocation.

Interestingly, the research also found that investors could benefit from looking to economies of scale, with an average 20% cost saving to investors who looked to larger share classes, or larger fund companies compared to smaller ones.

Nikolaj Holdt Mikkelsen, chief analyst for Morningstar Denmark and author of the report, said: “Given the regulatory support for the ongoing charge as the standard cost disclosure to investors, we undertook this study to understand whether a fund’s domicile made any notable difference to the cost of investing. Our findings demonstrate that domicile does indeed matter, with considerable degrees of variation between the average ongoing charge in each of the domiciles we surveyed. If we take an investment of €100,000 and assume an additional monthly savings rate of €500 for a further 10 years, and only take ongoing charges into account, we have a difference of some €9,500 in growth between an investor in the cheapest domicile, Norway, and the most expensive domicile, Belgium.”

Swedish response

Responding to the findings, the Swedish Investment Fund Association noted that while foreign domiciled funds may be more expensive, their entry into the local market had stimulated competition overall.

“There are in the Swedish market today many foreign registered funds. The Swedish funds account for a smaller proportion of the number of funds, but they account for about 70% of the assets. Even if the foreign funds have slightly higher charges on average, they have increased competition and the range of funds on the market to the advantage of investors,” the Association said.

It noted that the average charge for equity funds was lowest in Sweden of all the European domiciles included in the research. at 1.09% it just beat Norway’s figure of 1.1%, with Ireland as third cheapest on 1.14% according to the methodology.

To read the full report click here: [asset_library_tag 7227,Expenses in Nordic Investment Funds in a European Context]


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