Virgin Money UK Index Tracking
|Investment Fund (Unit Trust)
Published 20 September 2009
What's extraordinary is that investors continue to hold around £1.5 billion in the fund even though the annual charge is over six times higher than the cheapest All Share tracker fund currently on the market.
- Tracks the FTSE All Share Index, which is a little more diverse than the FTSE 100.
- Very expensive for a tracker fund.
This is a plain vanilla tracker unit trust which aims to mirror the FTSE All Share Index.
What's extraordinary is that investors continue to hold around £1.5 billion in the fund even though the annual charge (1% TER) is over six times higher than the cheapest All Share tracker fund currently on the market (Vanguard FTSE UK Equity Index, 0.15% TER).
Virgin's high annual charge could really dent investment returns compared to a cheaper alternative, as the following example shows:
Let's assume £10,000 is invested for 20 years with an annual index return of 6%. Virgin charges 1% a year and Vanguard has a 0.5% initial charge, £12.50 dealing fee and 0.15% annual charge.
|Value of £10,000 after 20 years|
|Virgin UK Index Tracking
|Vanguard FTSE UK Equity Index
Assuming both trackers mirror the index identically, the Vanguard tracker leaves an investor nearly £4,500 better off in this example.
In Virgin's favour the fund holds all the underlying shares in the All Share Index (whereas some trackers buy fewer shares and approximate the Index), which should ensure accurate tracking (before charges!). However, in practice the difference between the two techniques is usually small and could leave an investor either better or worse off.
History suggests UK stockmarket trackers tend to fare better than many funds run by active fund managers. So, even if you own this fund (hence paying over the odds for a tracker), you may still not have done ok versus a typical managed alternative. Nonetheless, do yourself a favour and consider switching to a cheaper tracker. It really could make a big difference to the value of your fund over time.
Not much else to say other than the fund is available within a Virgin ISA and remember the FTSE All Share is a weighted index. This means that although there's circa 800 shares in the Index, around half your investment will be exposed to the 20 largest companies.
Perhaps it's testament to the strength of Virgin's brand that so many investors remain in this fund, even though they could potentially save lots of money by transferring elsewhere. Or maybe they're just lazy...
Web Link: http://uk.virginmoney.com/virgin/unit-trusts/ftse/
If you found this review helpful, please add your vote by clicking here
Please Note: We display user reviews in good faith and cannot guarantee their authenticity. Never choose providers or products on the basis of
these user reviews alone. All information and data shown is as at the date of the review.