UK investment trusts managed by Dresdner RCM Global Investors have the lowest total expense ratios (...
UK investment trusts managed by Dresdner RCM Global Investors have the lowest total expense ratios (TERs), according to analysis by City Financial Communications.
In the Investment Trust Total Expense Ratio Directory 2000, Dresdner RCM came first in the rankings for best TER while Fleming Asset Management and Foreign & Colonial Management came second and third respectively.
TERs measure fees and expenses that are charged to an individual trust over an annual period and have a direct and assessable impact on performance.
These operating expenses are billed on an annual basis against a trust's income, whether it be to the capital or revenue account.
The directory analyses the total number of trusts within each management group and the percentage and number of trusts which fall into the best and worse quartile ranks.
Rankings were calculated by dividing the number of trusts in the six geo-sectors into four quartiles depending on the number of funds and range of TERs.
Trusts with a TER below 0.77% achieved a first quartile ranking. Portfolios with a TER between 0.78% and 1.13% received a second quartile ranking, those between 1.14% and 1.55% a third quartile ranking and finally trusts which are within the worse quartile fall between 1.56% and 5.38%.
The management group which achieved a higher percentage of funds within the best quartile, and therefore has a higher number of trusts with low TERs than any of the 213 trusts analysed, is Dresdner RCM Global Investors with 60% of its five trusts achieving a high ranking.
Fleming Asset Management came second with 50% of its 12 funds making the first quartile. In third place Foreign & Colonial Management recorded 50% of its range within the first quartile.
Looking at the worst quartile, 54% of Aberdeen Asset Management's 13 funds analysed achieved a 4th quartile ranking. This was followed by AIB Govett Asset Management, with 50% of its six investment trusts being present in the worst quartile.
Martin Currie Investment, third from bottom in terms of quartile analysis, recorded 43% of its seven investment trusts within the worst quartile.
One reason for the higher TERs can be attributed to geographical sector.
The majority of trusts within each of the three aforementioned management groups can be found in the Emerging and Pacific market sectors. The above analysis only included management groups that have more than five funds in order to obtain a fairer comparison.
This is because fund management groups with less than five funds tend to fall either in the top or bottom of the tables due to the small number of funds analysed in each of the management groups.
The directory also analyses individual investment trusts within geographical sectors.
The directory separates the trusts into six geographical sectors; Emerging, Europe, International, North America, Pacific and the United Kingdom.
A comparison is made of all the investment trusts' average figures in their separate geo-sectors and a further analysis is carried out on each individual sector.
Research shows the largest number of investments can be found in the UK.
Looking at the UK sector, the top three best funds in terms of TERs are Friends Ivory & Sime Investors Capital Trust, with a TER of 0.26%, Albany Investment Trust, with a TER of 0.30% and Edinburgh Investment Trust, with 0.34%.
Friends Ivory & Sime Investors Capital Trust and Edinburgh Investment Trust both have large fund sizes which bring down their TER due to economies of scale - which has the effect of spreading the annual costs resulting in a lower TER.
Albany Investment Trust has a relatively small trust size which should indicate a higher TER. However, the fact that the trust is self-managed can account for its lower total expenses, as they have no management fee.
There are eight self managed funds in total.
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