A simple – and cheap – new fund
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Senior Writer
Jody Clarke Jan 08, 2010
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As we've long pointed out, high fund management fees can have a huge impact on your returns. So it's good to see a fund manager get that message and put out a simple product that helps investors spread their risk at low cost.
Take the new Growth Fund Lite from T Bailey Asset Management, due to launch this month. This is a highly diversified fund of funds made up of trackers and exchange-traded funds (ETF), with a total expense ratio (TER) capped at 0.99%. That's somewhat more expensive than buying an ETF directly, where fees are typically 0.3%-0.6%, but it's much cheaper than the average fund of funds and other alternatives on the market.
For example, Seven Investment Management's range of passive funds of funds carry TERs of 1.6% for ordinary retail investors. For the Frontier MAP Balanced Fund, you're probably looking at a TER of 1.4% or more once you've bought it through an IFA, as it is not available through fund supermarkets.
So what can you expect from the T Bailey product? The provider says it will mirror the existing T Bailey Growth Fund, a globally focused vehicle that has a five-star rating (the highest level) from fund-research group Lipper. That fund is up 71% over six years against a 43.5% return for the MSCI World Index. Its largest holdings include the DB X-Trackers MSCI Emerging Markets ETF, the iShares FTSE 100 ETF and the Veritas Asian Fund.
The new fund's strategic asset allocation at launch will be 25% in America, 25% in Britain, 17.5% in emerging markets, 15% in Europe (excluding Britain), 7.5% in Japan and 10% in the Pacific Basin (excluding Japan).
Of course, you could buy the underlying trackers to construct a similar portfolio yourself without paying the extra half a percent or so that T Bailey charges above the costs of the ETFs. And if you're heavily involved in running your own portfolio, that's a better option.
But this fund isn't aimed at such active investors. Instead, it caters for those who don't want to, or can't put in the time needed to manage their investments in detail and want to entrust their money to someone else who will spread their risk. That's a valuable service, but it doesn't justify the high fees of many diversified funds. So with its comparatively low costs, for hands-off investors, the T Bailey fund could be a winner.
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