Closet Tracker funds - Is Yours? - YourMoney
December 3, 2015

Closet Tracker funds – Is Yours?

Closet Tracker Funds

It should be a clear choice for investors. Invest in an  Active or a Tracker fund but is your fund one of the “Closet Tracker Funds” charging you active fund fees?

In simple terms a tracker fund (one that closely mirrors an index) which is a relatively simple automated service to balance the holdings in a fund or choose an active fund where skilled stock pickers and managers select shares and investments using their expertise, analysis experience and research.

Of course, an active managed fund can perform better,  but a price is paid by the investor in higher charges to have access to these skills and management.  It appears at first glance to a clear choice for the investor and one on which a clear choice is available.

It is becoming clear that it is not as clear-cut as it appears.  In what is referred to as a “dirty little secret” by the Telegraph article below it appears that is some cases investors are being misled. Active funds typically have an ongoing charges figure of 0.9pc, while tracker funds can cost 0.1pc or less.

Why should investors pay for the active management when in fact the fund is or at least appears to be run as a tracker?  The effect on performance when comparing a typical tracker fee to an actively managed fee can be very significant.  These funds that claiming to be actively managed yet appear to be trackers are being referred to as “Closet Tracker Funds”

UK Press on Closet Tracker Funds

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The Daily Telegraph - Six ways to diagnose a Dud ISA Fund
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FT Adviser -

 

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