Typical Charges for Unit Trusts and OEICS

Initial charge

The initial charge varies from fund to fund and can be anywhere between 0% and 6% and this is included in the offer (buying) price of the units / or the share price if an OEIC. Commission to brokers is paid for out of the initial charge.

Annual management charge

Again this will vary from fund to fund but will usually be in the region of 1% to 1.5%. Many funds will pay brokers an annual renewal commission out of the annual management charge. This is usually in the region of 0.5% of the fund value.

Exit charges

Funds that have no initial charge usually have exit penalties. Typical exit penalties are 5%, 4%, 3%, 2% and 1% in years 1 to 5.

Performance related charges

This is a relatively new concept, as it used to be forbidden by regulations; therefore you can reasonably expect more funds to levy performance charges in the future. As the name suggests the charge is based on the performance of the fund. For example, a fund may increase the annual management charge by 0.5% if the fund is ranked in the top quartile of its sector on a rolling 12 month basis. Alternatively, a fund may levy an annual management charge of 2%, which will be reduced by 0.5% if the fund is ranked outside the top quartile of its sector on a rolling 12 month basis.