Ucits fund fees continued to drop in 2019

Monde
On the 10/26/20 at 7:17AM

by

Adrien Paredes-Vanheule

A report by the Investment Company Institute Global stresses that asset-weighted average ongoing charges for equity and fixed income Ucits funds fell three and one basis points over 2019 respectively.

The Investment Company Institute Global (ICI Global) published on Monday its annual research on Ucits fund charges, which have continued their downfall in 2019. The trend is ongoing since 2013 according to the association. Hence, asset-weighted average ongoing charges for Ucits equity funds (excluding ETFs) amounted to 1.24% at the end of last year vs. 1.27% in 2018 and 1.49% in 2013. This means in real terms that for each €100 assets under management, asset-weighted average ongoing charges for Ucits equity funds were €1.24. As for fixed income Ucits, asset-weighted average ongoing charges lowered slightly to 0.78% as at end of 2019 from 0,79% the year before and 0.98% in 2013. These of mixed funds remained unchanged at 1.41% between 2018 and 2019 (vs.1.45% in 2013).

ICI Global stresses - for all segments - that in 2019 like the previous years, asset-weighted average ongoing charges were lower than their simple average ongoing charges, which also plummeted in comparison to 2018. Simple average ongoing charges reached 1.48% for equity funds (-2bps vs. 2018), 1.02% for fixed income funds (-1bps vs. 2018) and 1.47% for mixed funds (-2bps vs. 2018).

Sectorial equity funds the most expensive 

ICI Global's research suggests that in the Ucits equity fund category, sectorial funds were the most expensive as to average ongoing charges (1.61%) at the end of 2019. They stood just before these of European small-mid cap equity funds (1.59%) and of global as well as of European large cap equity funds (1.38%). ICI Global identified the largest difference between average ongoing charges and asset-weighted average ongoing charges in US large cap equity funds (1.35% vs. 0.98% or 37bps). In the fixed income sector, emerging markets bond funds had the highest average ongoing charges (1.26%), followed by US bond funds (1.08%), global bond funds (1.01%) and European bond funds (0.81%). For the two first sub-fund categories (EM and US bonds), ICI Global's study found out a difference of 26 basis points between average ongoing charges and asset-weighted average ongoing charges.

The association said that the shift of assets to lower-cost funds drives the overall decrease in  ongoing charges of Ucits funds since 2013. The share of assets among funds in the lowest quartile of ongoing charges has generally increased since 2013, it explained.  As of end 2019, 34% of the net assets in equity funds were in those among the lowest quartile of ongoing charges, up from 29% in 2013 and 33% in 2018. For fixed income Ucits, 43% of assets at the end of last year 2019 were in funds among the lowest quartile of ongoing charges, compared with 31% in 2013 and 45% in 2018.

Cross-border fund fees decrease too

Over the 2013-2019 period, average ongoing charges of newly launched funds dropped too, to 1.25% from 1.59% for equity funds and to 0.89% from 1.25% for fixed income funds. Nevertheless, at the end of 2019, new equity funds gained 5bps year-on-year while their bond counterparts decreased 2bps yoy in average ongoing charges.

Another drop observed by ICI Global is that of ongoing charges of cross-border Ucits funds. Hence, average ongoing charges of cross-border equity funds were trimmed by 3bps between 2018 (1.30%) and 2019 (1.27%) while these of cross-border fixed income funds had a 2bps cut yoy to 0.80% from 0.82%.