Why paying more can sometimes mean getting more

The price you pay for any fund is one of the few things you can control about your investment returns. However, we don’t believe that should necessarily push investors towards the lowest-cost options. Investors need to look at ‘value’ – the return they get for the price they pay. Like M&S versus Poundland, it can be worth paying a premium for higher quality. 

An examination of the Ongoing Charges Figure (OCF) for the FundCalibre Elite Rated funds shows 85% of them have total charges of less than 1%*. This is a testament to how much fee pressures have brought down costs in recent years. 7% of funds have an OCF of less than 0.5%*, which makes them competitive with some passive portfolios. 

Among the lowest-priced funds, it is worth noting the Orbis Global Balanced and Orbis Global Cautious funds. Orbis has been an innovator on fees and its structure remains unique in the UK market. The mechanism is relatively complex, but the result is that investors pay when the fund outperforms and are refunded when the fund underperforms. It says: “If your money is at risk, it seems only fair that our fee is too.” For Orbis, it is a way of ensuring their interests are aligned with their investors’. 

Another striking factor is that many of the cheapest options are investment trusts, such as Scottish Mortgage, City of London Investment Trust, and Ashoka India Equity Investment Trust. These are funds delivering strong, active performance at a price competitive with passives. Investment trust boards have done a good job in recent years of putting pressure on their investment managers to bring down costs. More than 30 investment trusts reduced their charges last year**.

Bond funds tend to have greater representation among the cheaper funds as well. Bonds tend to be lower return, so the drag effect of higher fees would be greater. The Artemis Corporate Bond fund has an OCF of just 0.35%, while the M&G Corporate and Strategic Bond funds come out at just 0.43%*. 

Passive bond funds can often be more expensive than their equity equivalents, which means the gap between a passive bond fund and an active bond fund tends to be narrower. Equally, we would argue, passive bond funds will often be weighted to the most indebted securities, so this is an area where paying the little extra it costs for an active manager can really pay off. 

It is also interesting to see a number of multi-asset funds among the cheapest options – Schroder Global Multi-Asset Cautious Portfolio at 0.23% and Waverton Multi-Asset Income at 0.49%*. Multi-asset funds are often more expensive than their single-strategy equivalents, because there can be double layers of fees – one to run the portfolio, and one for the underlying investments. However, multi-asset managers have been creative in finding ways to bring down costs, including using directly invested or passive options. In Schroders’ case, the fees are low because all the management is done in house. These can be great one-stop-shop options for investors. 

Most equity funds now hover around the 0.6% to 0.9% mark. Areas such as smaller companies and emerging markets funds tend to be more expensive because they are more research-intensive. However, these are also parts of the market where there can be significant mis-pricing. As such, active managers can add a lot of value by getting into the weeds and finding opportunities. 

Among the most competitively priced smaller companies are the WS Amati UK Listed Smaller Companies, at 0.9%, Unicorn UK Smaller Companies at 0.89% and the Global Smaller Companies Trust at 0.78%*. Among emerging markets, we would highlight Invesco Global Emerging Markets at 0.75% and JPMorgan Emerging Markets Trust at 0.79%*. 

Of course, we also need to highlight the most expensive funds. Often, there is good reason for a higher price. Buying and selling infrastructure or commercial property, for example, comes at a higher cost than trading equities. Equally, multi-asset funds that invest in external funds will tend to have a higher overall cost.

Nevertheless, for every fund we rate, we believe the return potential more than justifies any additional cost. Warren Buffett once said about the companies in which he invests: “Price is what you pay, value is what you get.” We believe the same is true of funds. Getting a good price is helpful, but getting true value is priceless. 

*Source: FundCalibre funds at 21 May 2025, main units only

**Source: AIC, 14 February 2025