I got really excited recently when I noted the addition of some of the CoreShares funds to the list of funds on one of the LISP platforms that we use…
And then I started doing some quotes to see what the effect the addition the CoreSharesTop50 would have on the fees on the client’s portfolio. I was surprised to see that the EAC of the Top50 fund is just under 1.5% which seemed really odd for a passive fund that claims to have really low fees. So I started investigating…
I started with the fact sheet for the fund which shows an annual fund fee of 0.2% (max) and a TER (total expense ratio) of 0.26% (including the fund fee). The TIC (total expense ratio) shows a figure of 0.43% but there is no mention anywhere of the EAC (effective annual cost) on the fund. So I called the CoreShares Call Centre and was told that I would have to open an account to see this information (which seemed very odd). I called again and was then told to send an email requesting the info, which I did. Still nothing, so I called again and was told it would be sent to me (still waiting).
The next step was to pull the missing information from Morningstar (through a connection in the asset management industry) and it turns out that the TER may well be 0.26% but the transaction costs (according to Morningstar) are around 1.24% so the EAC is actually around 1.5%. So much for cheap passives. I suspect that the high transaction costs might be a function of the fund size but I’m still waiting to hear.
So for now, until we can clarify the cause of the high EAC on the fund, we’ll be staying away from it and until further notice, you be better off (from a fees point of view at least) in an actively managed fund like the Coronation Top20 Fund if you are looking for a concentrated equity portfolio.
It is also absolutely crazy that we have 4 different ways of expressing the fees on a fund -and they are all different:
- Annual management fund
- Total expense ratio
- Total investment charge
- Effective annual cost
Surely “total” means “everything” and there should be no difference between the Total Expense Ratio, Total Investment Charge and the Effective Annual Cost…little wonder that there is so much distrust in the investment industry!