UK fund returns take a knock despite fee drops

A decrease in administration fees has not prevented a reduced fund performance.
By Paul Walsh
UK fund returns across all equity sectors were lower in 2015 than in the previous three years, despite a decrease in costs such as custody, fund administration and regulatory costs.

New research from the Investment Association analysed fund performance for a sample of active and passive equity funds from July 2012 to May 2015.

Its results from 2014-15 show a fund return of 8.14 bps compared to a benchmark return of 8.51 bps representing a realised outcome of -0.37.

These figures come in spite of a reduction of the OCF taking into account custody, fund administration and regulator fees, among others.

OCF costs stood at 1.40 bps across all equity sectors in the 2014-15 period compared to 1.46 bps in 2013-14 and 1.42 bps in 2012-13.

The results show a stark contrast to 2012-13 and 2013-14 when the realised outcome of fund performance stood at 0.49 bps and 1.99 bps respectively across all equity sectors.

The research suggested that the decrease could also be put down to implicit costs that are essential in accessing capital markets, particularly the bid-offer spread and market impact.