Investment Trust Charges

I’m trying to understand the charges involved with investment trusts, for example JPMorgan China Growth & Income (JCGI). Freetrade shows the below charges:

  • Stamp duty = 0.5% (paid on execution)

  • Ongoing charges = 1.24%

  • Transaction charges = 0.58% (also paid on execution I assume?)

My understanding is that the ongoing charge is already reflected in the share price, is that correct? Also, if was to invest 12 times over 12 months, I would essentially be paying 1.08% (stamp duty and transaction charges for each trade) x 12 = 12.96% of my investment would be spent on fees?

Last point, the JP Morgan website lists different charges for this fund, just a 1% ongoing charge (JPMorgan China Growth & Income plc - Ordinary Shares | J.P. Morgan Asset Management). Which would I be charged if I were to invest via Freetrade, the 1.24% listed on FT or the 1% from JPM?

Thanks,

Matt

Transaction charges are already built in. The ongoing charge and transaction charges are the total cost to run the fund. As I understand it it lags behind so the cost shown is the cost for the previous year recalculated by the fund every year.

I prefer to look at the KID for the breakdown in charges.
The fees do get a bit murky with some Investment Trusts.

1.24%: The impact of the management fee payable to the Company’s manager (0.86%) and
the Company’s other costs of administration (0.15%).
Also included are the costs (0.23%) of borrowing money to invest, including interest and other fees but not the income or capital effects of investing these borrowings

Generally speaking I don’t factor transaction costs into the ongoing charge as it can change dramatically. If a Trust is growing rapidly then it transaction costs can rise as they are having to do more transactions. I think this trust falls under that category as it’s grown from 250m in 2019 to 650m currently

OCFs stated are usually quoted ‘ex-ante’ - that Latin nonsense for ‘estimate’. They are deducted daily from the value so reflected in the price.

Transaction Costs are my favourite subject. Honestly. In summary : they are nonsense and built into the price but the regulator decided you needed to see them split out so you are aware there is a bid/offer spread when trading! But the methodology used to calculate them is utter madness. You think ‘cost’ means ‘loss’??? No, no, no. Under the rules you could (but not in the future) claim a profit from the spread!! How, you ask? Honestly I’d have to write an essay . It’s too much for here. In short- ignore them. They are influenced by the market, by the funds mandate, by the funds growth/decline, by the frequency of trade, by the maths employed by the company in question. All in all - for a rule based in comparability - it does nothing to enable comparison.

I think I’ve written on it before, so search my rants on this forum for more details

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But also be aware Investment Trust charges on all platforms, of all sizes are bad… and usually wrong… if you think you’re paying x% per year… you’re probably not as data vendors are massively behind in feeding this data to end clients.

Utter madness

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Here’s a good one to demonstrate. This is Freetrade specific but the issue is widespread and across every platform and every IT. This shows the scale of the “errors” some have and display to their clients.

I like Monevator and that article demonstrates that even some Bodies directly associated with investments actively dislike KIDs. I get that. They tend to dislike the forward looking projections mandated by KIDs that aren’t mandated in KIIDs. But what was Monevators conclusion? OK, KIDs aren’t great but they ARE a completely valid source of OCF ad Transaction Costs data. You could refer to the European MiFID Template or European Priips Templates (EMTs and EPTs) but a lot of Asset Managers often don’t include their ITs in that data. That leaves with only a select sources of data points to present to your clients. OCFs (presumably ex-post or, usually, ex-ante) from either Factsheets or KIDs. In the example above no documentation suggests the fund OCF is 0.88 as FT display. It can be either 3.33% as the KID displays (Ex-Ante, ie Estimated) or it could be the 2.91% that looks like an Ex-Post (ie. last years ACTUAL charge)

Complex topic. Probably not articulating it well.

I’m tired

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Then just to reinforce the point that this entire process is complex :mage:

The Finki IT API just updated and there was a new KIID for this fund released 9th March…

So now it’s an OCF of 3.30% and a Transaction Cost of 0.28%

I guess I was just posting this to help explain the different “costs” that come with Investment Trusts
I agree Transaction costs are mostly irrelevant. Likewise I also disagree gearing costs should be considered in the cost as they are actually often a benefit of the closed-end structure if used correctly.

I always go to the KID to understand the costs in better detail

Understood and agreed.

Problem is you’re not usually fed the correct KID with the correct charges.

Managing this process is difficult and all platforms are pretty poor.

If only there were an easy API that automatically found the latest KID and automatically extracted the key charges :flushed:

itAPI

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