Visit our Unit Trusts In A Nutshell for more discussion on unit trust pricing and fees.
Unit Trust Costs
Prior to the advent of the Collective Investment Schemes Act in 2003 unit trust pricing was somewhat complicated, with each fund publishing 4 different prices each day! This has now simplified to a single Net Asset Value price, with any transaction fees and commissions being seperately itemised.
Unit Trusts can be purchased directly from the Management Companies, or through a Linked Investment Service Provider (LISP) - also called a Linked Product Provider. They are also purchased as part of life insurance investment products (generally endowment-type policies, which are costly and often not very transparent) and retirement products.
LISPs provide a single point of access and reduced costs of switching between different management companies. However, most LISPS are group companies of banking, assurance and asset management brands, so product range and advice will generally be less than impartial, and almost all will incur you higher initial and ongoing costs. Equinox differs on both counts. We are independent, and our fees are often cheaper than approaching the management company directly.
Unit Trust Management companies charge an initial fee when units are purchased. To the public this is generally in the region of 5% plus vat for an equity fund, 3% for a property fund, 1% for a fixed interest fund, and 0-0.5% for a money market fund.
To LISPs (such as Equinox) who effectively buy the units 'wholesale'
the initial fees are generally 0 - 0.25% for all other funds, and 0% for money markets.
Most LISPs will then add their own initial charges (of around 5% for equity funds and less for others) to this figure.
Equinox adds a nominal charge of 0.25% for all funds.
Most LISPS (and management companies) will apply full charges whether or not you approach them through a financial advisor, and they will offer a limited selection of the full range of unit trusts available. More recently, a few management companies have adopted a zero-fee approach for direct investors - but obviously limited to just their own funds. Equinox is one of the only LISP's that passes on wholesale cost savings to you, as well as offering the widest range of funds.
Equinox also limits initial fees to a maximum per fund - so for large investments your savings can be even greater.
See Our Fees for more details.
With effect from October 1st, 2011, there are no switching fees on any portfolio types on the Equinox platform.
Annual Management Fees
An annual management fee is also charged by the management companies. Generally this is around 1% + vat for actively managed equity funds, and less for other funds. However, annual charges can vary widely and can significantly affect returns over time, so it is worth taking note of them. Money Market funds generally charge a 0.5% + vat annual fee. Some funds charge further performance fees based on their performance relative to a stated benchmark.
LISPs also apply annual management fees, generally of around a further 1-1.5%. Equinox charges a flat minimum per month or a maximum 0.7% annual fee, with lower fees on greater portfolio amounts. See Our Fees for more details.
Included in the quoted daily price of the unit trust are the costs to the fund management company of trading underlying assets. An equity fund will, for example, incur Marketable Securities Tax and brokerage fees when it buys shares.
Note that Funds of Funds will also incur the management costs of their underlying fund holdings as 'hidden' costs which will generally impact negatively on their performance.
At Equinox we believe in simplicity and transparency of fee structures and in a service ethic that is focussed on the needs of our investors.
All investments, including unit trusts, carry risk. The value of your investments can go down as well as up. Information and opinion provided on this website is of a general nature. It does not take into account any person's specific circumstances. It is not intended to provide personalised financial advice, and should not be construed as such.
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