‘I paid my­self only £21,000 in three years’


The Sunday Telegraph - Money & Business - - Money -

Can­driam Equities L United King­dom, each with an OCF of more than 2pc, dra­mat­i­cally un­der­per­formed the FTSE All Share. The only other fund with an OCF greater than 2pc, the Bromp­ton UK Re­cov­ery Trust, was among the top 25pc of funds.

When is a fund worth a pre­mium?

Ed­ward Park, of wealth man­ager Brooks Mac­don­ald, said the first stage in pick­ing a fund is to learn about its in­vest­ment process and phi­los­o­phy to see if it fits with the in­vestor’s goals.

Then, he said, the fund’s per­for­mance af­ter fees can be as­sessed against both its peers and the bench­mark in­dex. Read more about how to do this at tele­graph. co.uk/go/fundques­tions.

“This is to test the value the fund can add and that it be­haves how you’d ex­pect in vary­ing mar­ket con­di­tions,” he said. “If you are com­fort­able that the fund is per­form­ing well, and the man­ager is gen­er­at­ing ad­di­tional value, then cost is a con­sid­er­a­tion but not the most im­por­tant fac­tor.”

He added that a fee of more than 1pc re­quired “a good ex­pla­na­tion” but that “price alone shouldn’t mean a fund is com­pletely dis­counted”.

There are cir­cum­stances in which a higher fee is to be ex­pected. Funds that op­er­ate in a niche sec­tor such as smaller com­pa­nies or tech­nol­ogy, or where there are lim­its to how big the fund can grow, may war­rant a pre­mium price.

“The core jus­ti­fi­ca­tion for higher fees is a strong in­vest­ment propo­si­tion com­bined with ei­ther a spe­cial­ist area or a con­straint on fund size,” said Mr Park. He high­lighted Old Mu­tual UK Dy­namic and Tri­tax Big Box as ex­am­ples of funds where a higher fee was jus­ti­fied.

The Old Mu­tual fund’s size is “nat­u­rally lim­ited” by its in­vest­ing style, which re­quires it to be able to buy into and sell out of small and medium-sized com­pa­nies at will, he said. Tri­tax Big Box, a quoted fund that in­vests ex­clu­sively in dis­tri­bu­tion and lo­gis­tics ware­houses, “pro­vides ac­cess to a spe­cial­ist man­age­ment team” whose “spe­cific skill set val­i­dates a greater than av­er­age charge”.

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