This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Oscar Wilde coined the phrase that a cynic is “a man who knows the price of everything and the value of nothing.” By that definition, investors have for some years now been taking an increasingly cynical approach to investing.
With the longest bull market in history making life easy for cheapo passives, and MiFID II underlining the focus on costs from a regulatory standpoint, negative pressure on fees across the industry has reached fever pitch. Soon the FCA will introduce regulation designed to force open-ended fund boards to evaluate whether or not they are good ‘value for money’ on an annual basis.
While more transparency on costs is a good thing, one consequence is that many investors are increasingly viewing the cost of an investment product as the most important factor, even beyond performance.
With the great playwright’s words in mind, we decided to examine the evidence. We examined the relationship between how much a fund costs and how it performs, with surprising results.
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