Stretching to perform
Oksana Patron writes that out of the highest charging international equity funds, only one fund performed in the first quartile for the year to 31 July 2017. This is part five of the fee comparator feature.
Within the international equities sector, the market only saw one fund out of the five most expensive funds that sat in the top performance quartile, for the 12 months to 31 July 2017, according to the FE Analytics.
The highest charging funds were the Australian Ethical International Shares Fund and the Advance Asian Equity Fund, both with an annual fee of 2.2 per cent. They were followed by the Advance International Shares Multi Blend Fund at 2.1 per cent, the Advance
International Sharemarket Fund at 2.05 per cent and the Hunter Hall High Conviction Equities Trust at 1.8 per cent.
BT Financial Group owned Advance Asia Equity Fund was the only fund that was placed in the top performance quartile at 24.44 per cent, for the year to 31 July 2017, against of the sector’s average of 11.54 per cent.
However, its Advance International Shares Multi Blend Fund and Advance International Sharemarket Fund returned 11.08 per cent and 8.91 per cent, respectively.
BT Financial Group declined to speak to Money Management but provided a statement that said the funds were closed to new investors, and the range of fee structures were developed to reflect the different arrangements and areas of demand that were relevant at the time of investment.
“Often these older retail funds are relatively small compared to the currently available options, but are maintained by their providers to ensure investors can continue to hold their investment if they choose,” the statement said.
“It’s important for investors to seek professional advice to determine if it remains appropriate to maintain their investment holdings based on their needs and circumstances, including their current tax position.”
Australian Ethical’s chief investment officer, David Macri stressed that in his view the universe of funds surveyed by FE Analytics was predominantly made up of wholesale funds.
He explained that Australian Ethical offered both a retail and a wholesale version of the Australian Ethical International Shares Fund and the retail fee was 2.2 per cent per annum while the wholesale fee was 0.85 per cent, and that the wholesale fund could be accessed via platforms or directly for the customers who had $25,000 or more to invest.
“We are very confident that our wholesale fee is priced extremely competitively,” he said.
“For the year ended 30 June 2017, the performance of our wholesale fund after fees was 14.8 per cent, this was 0.1 per cent above the benchmark which is the widely used MSCI World ex Aus Index on an after fees basis.
“The performance of our retail fund after fees was 13.9 per cent and this compares to the median of 15.1 per cent,” Marci said.
Speaking about the fund’s investment strategy, he said that there was an extra cost for establishing the investment universe that was under an ethical charter as there was a lot of work with screening the investment universe.
“We still have to run a profit to be a sustainable business,” he said.
“With our international fund, we try to give our investors a return in light of the benchmark, the MSCI World ex-Australia, whether we’re beating the index it doesn’t mean anything for us but what we’re trying to do is get the benchmark performance but under our ethical criteria.”
To achieve that, the fund said a lot of time was being spent ensuring that the screening process reflected the ethics and integrity.
Following this, he said: “Obviously we don’t have an investment team sitting in New York or London or Hong Kong trying to pick outperforming stocks so what we do is we try and generate a portfolio that is going to perform like the benchmark so ‘index like’ ”.
According to FE Analytics data, the Hunter Hall High Conviction Trust’s performance for the 12 months to 31 July 2017 stood at -20.03 per cent.
Although the fund did not provide any specific comments on fees and charges, it announced in August that since the merger between Hunter Hall and Pengana Capital all the strategies would be run by Pengana’s international capital team and Hunter Hall’s strategy would no longer apply.
Following this, a few Hunter Hall funds reduced their fees. However, at this stage, the company did not make comments on its plan for the High Conviction Equities Trust.
AUTHOR
Oksana Patron
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