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Why does TER vary on the same fund?

Investment | ISAs Helpful? 3

Asked by anker, submitted 20 February 2012.

Open Quote I am looking into cost of ISAs, using the Aberdeen Asia Pacific & Japan Fund,

Hargreaves and BestInvest Select both list the same Mgmt Fee (1.75%), TER (1.8%), and loyalty Bonus/Discount (0.375%). Cavendish shows Mgmt Fee (1.75%), and Rebate (0.5%), but on the Fundsnetwork (which Cavendish uses) website the TER listed for the fund is 1.91%.

Does that mean that Cavendish is only marginally cheaper (as the higher TER eats into the rebate) or should the TER for the fund be the same regardless where I buy it? I am a bit confused!
End Quote

Answered by Justin on 07 September 2012

Given you'd be buying units in the same physical fund whichever of the above routes you choose, the actual TER will be identical whichever broker/platform you use.

The reason for the difference will be administrative, most likely they're not all displaying the TER calculated to the same date, i.e. someone's slow to update their figures. The best source for an up to date TER should be the fund manager's own factsheet, although I've seen out of date figures used on these two on more than one occasion! Although not relevant to this fund, performance fees can also cloud the issue as I've seen some brokers quote the TER including the fee while others exclude it, leading to a significant quoted TER difference on the same fund.

Anyway, bottom line, focus on fund rebates net of any platform and dealing fees if you're looking for the cheapest deal.

The only time I'd expect TERs to physically differ on the same fund is if it's a special version run by an insurance company, in which case the charging can sometimes vary. And, obviously, if the fund has different class classes, e.g. institutional and retail.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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