With fees, a little understanding goes a long way
What are you paying for your investments? Find out with a guide to your main charges
Fees are central to investing, but they are also much misunderstood. They are split into many categories, and disclosure varies from fund to fund.
Managed funds are unlisted unit trusts. They are the standard mutual funds you see in banks.
The first thing you pay is a selling commission, usually a one-off charge of up to 5 per cent. High-value (in other words, rich) clients will often be offered a discount on this fee, down to as little as 2 per cent. Even if you're not loaded, always ask for a discount.
Investors usually focus on the management fee, and rightly so, as it's typically the biggest recurring cost of any managed fund. The annual charge is paid to fund managers to make decisions about which investments should go into the fund. Fund houses will charge up to 2.5 per cent for this service, but more typically it comes in at around 1.5 per cent.
Funds also have other costs. These include charges for accounting, custody, depository services and general administration. Bigger funds can disperse these charges over a wider base and generally the cost is manageable - less than 1 per cent a year. Note that Hong Kong funds vary greatly in their disclosure of this information. Some funds provide it on key fact statements (the main documents investors see), others do not. You might have to dig into a fund's annual report to get the details.