Investors in Baring Japan Growth Trust face paying 20 per cent extra in fees every year in the latest sign that fund management groups are increasing their charges.
It emerged this month that by this summer more than 100,000 investors will pay higher annual management charges to Credit Suisse Asset Management and Threadneedle.
Now Baring is to raise the annual management charge on its Japan Growth Trust from 1.25 per cent to 1.5 per cent in an increase which the fund management group said was likely to take effect from the end of July.
The charges on the Korea Trust and the Eastern Trust will also go up in the same way.
Certified financial planners – independent advisers with high-level qualifications – said the move was likely to cut returns for investors who had lost money in the fund.
An investor who had put £1,000 in Baring Japan Growth in April 1995 would have just £503 today, according to Standard & Poor’s, the fund analysis company.
Many Japanese funds have suffered as stock market investors reacted to the country’s deflation, but the Baring fund did worse than some rivals.
The average fund in the sector turned £1,000 into £731 in the past 10 years.
Jason Butler, a former board member of the Institute of Financial Planning, said that in a low return environment any increase in fund management fees would have a greater impact because charges took a larger chunk out of investors’ funds.
“In a low return environment, costs matter,” Mr Butler said.
Other certified financial planners suggested that clients would be ill-advised to pay higher charges for a fund which that had performed poorly over the long term.
Julie Lord, the managing director of Cavendish Financial Management, said: “Why would you want to pay more if you could get better returns elsewhere?”
Ms Lord warned that some investors failed to pay close attention to letters from fund management groups about charges.
She said many clients – even affluent investors using fee-charging certified financial planners – often throw letters into the bin. “They’re probably not looking at their post very closely.”
However, Baring Asset Management said it was increasing charges to cope with the rising cost of compliance.
Fees were low compared with competitors and Baring had not raised prices for several years.
David Kiddie, head of equities, said the Japan Trust Growth fund manager had only been in the job for 4½ years and was not responsible for 10-year returns.
“He has made money in a sector that has not done so. I think he’s doing an outstandingly good job. I ask him to do better than the index and the competition,” he said. Ian Pascal, marketing director, said: “It does become increasingly expensive to run these products and that’s why we have taken the decision.”
Credit Suisse Asset Management and Threadneedle also blamed the rising cost of regulation for their decisions to increase fees. They also pointed to increasing burdens caused by distribution and administration.
The fund management group added that the Japan Growth Trust had beaten its benchmark in the past five years. An investor who had put £1,000 into the fund in April 2000 would have £567, beating the sector average of £552.
Returns have improved in the past three years. £1,000 invested in April 2002 would be worth £1,042 today, outstripping the sector average on £983.
Projected total expense ratio based on higher AMC: 1.67%
Sector average: 1.63%
(Source: Fitzrovia International)
For more fund reviews see www.ft.com/fundfocus
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