Just a short ‘un on HL’s new shiny Wealth 150+.
You can read all about it all over the place so we won’t do a big list of all the funds here. But a couple of interesting things have popped up. First, naturally, a few folk have been looking for dodgy wheezes – us included – in the best friends list of 27 actively managed funds (there are some passives too).
A classic wheeze when adding a new share class is to explode the additional expenses – you cut the headline AMC, but bump the expenses so the TER or OCF is largely the same.
Most of the 27 – 18 to be exact – are standard share classes with rebates, as Nick Paler points out in Investment Week. That means that that particular dodge isn’t available. It also means you get taxed on any unwrapped holdings in those funds, but maybe that doesn’t matter too much if you’re filling out a tax return anyway.
9 of the 27, though, are new SUPERCLEANâ?¢ share classes. So we beetled off to find the nearest possible share class to them. Some hours later, after swearing at the fund industry till the air turned blue, this is what we got. Now, we ignored AMC here and just looked at OCF – so we’re including published additional expenses, but not hidden portfolio turnover costs. Those are sneaky and iniquitous in many cases, but they probably won’t vary much share class by share class, so we’re ignoring them for now. The table shows you what we found:
And what did we find? Well, this is weird. We found the opposite of what we expected. If you read across the table, you can see in the last 3 columns the difference in AMC, in OCF and then in additional expenses. In that last column, where you see a + sign it means that the standard share class has higher additional expenses than HL’s new one. Where there’s a minus (only for Old Mutual) it has lower exes, and a couple are identical. Look at the Morgan Stanley fund. The AMC is 25bps cheaper at HL. The exes are 19bps cheaper, giving a total discount of 44bps.
All of this looks pretty odd to me, but it’s the best we could find from the morass of crap that masquerades for data in this sector. Maybe nothing’s going on, but for sure it demonstrates that you can’t look at AMC only. Actually, HL could have pushed OCF here and looked even better.
None of this means, of course, that the Wealth150+ is worth looking at – unless these funds float your boat. If the Morgan Stanley Sterling Corporate Bond Fund is your idea of a wet dream, then you can save a bucketload by paying your 0.45% to HL and getting a 0.44% better deal. Platform for 1bp shocker!
Fidelity had a shot at beating HL at its own game with its price promise – you can get a refund of fund AMCs plus platform charges that you could have got cheaper elsewhere. This lasts for 2014 only and has a few other caveats. But the main thing here is that if you’re reading this and thinking of using the Fiddy offer, you won’t be getting back any difference in additional expenses. So – for once – compare the AMCs not the TERs and subtract the 10bps difference between Fiddy and HL.
When I started this analysis I reckoned we’d find that the gap was a lot narrower than headline AMCs would suggest. I was wrong about that. The next move is with the fund managers; keep watching. Lots more to play out here.