The graphs should be standardised, i.e. all over the same time period – I don’t want performance over 20 years but gearing, discount, etc (which could strongly influence performance) over only 5 years. Also, a new trust with only a few years history should still display graphs over the standardised time period, leaving some blank space – to allow easy comparisons between older and newer trusts.

If a trusts remit has significantly changed that should be marked on all the graphs with a note at the end to explain.

Thanks, Bill. Great idea to add shareholdings in there as well.

@chrisB
Totally agree. There was a good article from David Stevenson a few months ago looking at this very thing, highlighting the fact while institutions push back on this, no one is really fighting for us retail investors.
https://citywire.co.uk/funds-insider/news/david-stevenson-cynical-fund-fees-punish-private-investors/a1199885

Of course, some larger trusts do reduce the percentage as they grow larger, or have tiered rates, but they still don’t pass on the full cost savings.

@H.Jones
Yes, the fact that the OCF doesn’t include some pretty major costs has certainly been exposed by the introduction of KIDs. There’s still a long way to know but, hopefully, now the cost genie is out of the bottle we may see some sensible discussion about this and more consistency over time. I’m not expecting any quick fixes mind you.

Thanks ITinvestor for this interesting article ‘Key Information I’d Like To See’ posted on 04.04.2019.

My take on KIDs and lack of compliance with cost disclosure.

Unfortunately there are inconsistencies and lack of application of regulation (Packaged Retail and Insurance-based Investment Products (PRIIPs). For example, take RIT capital partners (they are not alone and I found many other examples of ITs where there are glaring inconsistencies of the type discussed below) in the RIT capital partners KID document the total costs (impact on return) is reported as being 4.17. However, Fidelity and Interactive Investor platforms both quote OCF’s figures of 1.02. This is a big difference and contrasts strongly with Charles Stanley Direct which quotes on their own website an OCF figure of 4.17 (the same figure that is found in the KID document).

I have just done some quick calculations using a realistic 10% annualised growth (dividends reinvested) over a 10 year period for RIT capital partners and compared the performance with Fidelity index fund P that tracks the MSCI world index. In fact, Fidelity index fund P (with an OCF value of 0.12) slightly outperformed RIT capital partners over the ten year period (evidence from FE analytics). The final return with an OCF of 0.12 (Fidelity index fund P), 1.02 (RIT capital partners; figures quoted by Fidelity and Interactive Investor) and 4.17 (RIT capital partners; the figure quoted by Chales Stanley Direct) would be (after 10 years) £256,559 (with fees of £2,815), £236,302 (with fees of £23,073), £176,234 (with fees of £83,140). These are huge differences!

Clearly for the consumer, total investment costs should not be hidden in KIDs and should be shown upfront on the investment platform website as ONE figure (encompassing as you rightly suggest in your article directors’ fees, fund management fees, trading costs, administration fees paid to custodians, registrars, auditors, lawyers etc, interest costs, fees charged by any underlying funds, fees paid for ‘carried interest’ by the likes of private equity funds, plus an explanation of how these are calculated).

Its quite simple really, customers need to know the TOTAL cost (total impact on return) of investing and illustrations of how this figure impacts on their returns in different market scenarios. It’s not rocket science and according to a recent statement by the FCA unrepresentative transaction costs are caused by “poor application of the priips methodology”. Instead of deliberately blurring the costs issues for the consumer, the The Association of Investment Companies (AIC) could help investment trusts managers to correctly apply priips methodology and not act like a former Eastern German stasi-like authority attempting to suppress the truth about investment costs (burning KIDs before reading etc. – how ridicilous!) It is my hard earned money they are extracting as fees after all.

I am in full agreement with an FCA recent statement that “inconsistencies between documents and websites mean consumers can find the information difficult to understand”. Mr Andrew Bailey (FCA) went on to say, “While awareness of the rules appear good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged”. I totally agree and urge the FCA to take further steps to address this issue.

Yet the industry refuses to move away from percentage charging. I say let’s have an industry prescribed ‘Cost to Run the Trust’ figure of £XXX which is a flat fee that pays for everything including the portfolio manager. It would then be up to the trust’s directors to justify why they are paying extra.

This would only work for trusts that invest in listed equities, as there’s no more work selling £1m share investment than selling £100m. So this wouldn’t work for say REITs or Private Equity trusts as the work of the manager could be quite different depending on the assets owned.