Say hasta la vista to the costly fund managers

BY the time you read this I will have hopefully gleefully sat through the new Terminator movie – Dark Fate – which is now showing in cinemas. I have an admission to make – that I’ve always had a (now not so) secret admiration for Arnie Schwarzenegger and been a fan of the Terminator sci-fi movie series. His delivery may be wooden but Arnie has a certain wit that appeals along with his memorable catchphrases (hasta la vista baby, I’ll be back).

While good old Arnie is back as the Terminator for the nth time – the same is unlikely to be said for fund manager Neil Woodford, who incidentally also has a rather wooden delivery, a little less wit and whose fate certainly looks dark. Just like the destiny of thousands of investors who look set to lose huge chunks of their investment in the disgraced fund manager’s Equity Income fund that is in the process of being wound up.

Fund managers across the industry have watched in alarm as events at Woodford Investment Management unfolded. In the latest twist, last week the management of the fund’s sister investment trust Woodford Patient Capital was transferred to Schroders (see The Woodford Files in Wealth, pages 58-59).

Woodford’s troubles are largely of his own making – switching his successful and safe as houses investment style from his days at Invesco Perpetual to seriously risky – picking the shares of illiquid companies that were difficult to sell in a hurry. His fellow managers are hoping not to be tarred with the same brush.

But as a group they are already coming under increasing pressure to prove their worth. A fresh squeeze is being applied by Vanguard, one of the biggest players in the passive investment world. Last week it cut fees on 36 funds to an average ongoing annual charge of 0.2 per cent. Compare that to a not untypical 1.5 per cent ongoing on a fund run by a walking, talking, pinstripe type in the City.

Sean Hegarty, head of Vanguard for Europe, says investors are starting to question whether high fund managers’ fees provide value for money. He tells the MoS ‘there has long been a misconception that the more you pay for an investment, the better it performs’. In fact he argues that the more you pay, the less of your return you get to keep. Whilst there are some admirable managers out there who earn their generous wages there are plenty more that don’t. Hegarty asserts: ‘There are many things about investing you can’t control, but cost is not one of them.’

IF you got up this morning having forgotten that the clocks went back – then do not despair. You have just gained an extra hour of valuable me time. Do not go back to bed but instead use the spare 60 minutes to do all those painful yet fruitful activities you have been putting off – and still have a full Sunday ahead of you.

This extra time is particularly useful for people who prefer to file a tax return in old fashioned paper form. The filing deadline for the tax year ending April 2019 is this coming Thursday October 31 (if you do it online you have until January 31).

MISS the cutoff date and you’ll be fined £100, even if it turns out you don’t owe any tax. You’d be forgiven for overlooking this date – what with Halloween and a possible Brexit vying for attention in the diary.

So if you haven’t started yet, spend half an hour gathering the paperwork – and sending any emails requesting any missing items urgently. If you are employed, this will include your P60, which states the tax paid on your income, and your P11D, which details expenses and benefits such as free health insurance. Check what pension contributions you have made – so that you can claim tax relief. Any dividends from shares and interest from savings will also need to be declared – unless held in a taxfree Isa. If you rent out a second property you will have to provide details of the income and expenses on a special extra page. This can be downloaded and printed from the internet – as can the whole tax return.

If you manage to gather the relevant information in that time pour a coffee and spend the remaining 30 minutes completing the forms. Job done.