Managed Funds Are these managed fund fees normal or ridiculous?

Discussion in 'Shares & Funds' started by Jasper, 10th May, 2019.

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  1. Jasper

    Jasper Well-Known Member

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    Hi Team,

    We set up a managed fund about 7 years ago and I've only just had a good look at the fee structure (shame on me!).

    Are these fees within the normal range or high? Is there any way I can avoid the advisor fee seeing they do nothing?
    Details: Praemium SMA. Current balance of $71,000. 106% return since inception.
    Fees:
    - Non-advise fee charged by the fund: $53 inc gst per month
    - Advisor fee: $46 inc gst per month (adviser has done nothing since setting it up).
    - Total $99 in fees per month.

    Thanks.
     
  2. rizzle

    rizzle Well-Known Member

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    Well at $99 a month, that's 1.6% of your account balance each year. To me that's exorbitant, but I'm an advocate of low cost passive index funds (<0.2% expenses).
     
  3. geoffw

    geoffw Moderator Staff Member

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    Has your fund outperformed the comparable index by more than 1.4% (your 1.6% cost less .2% for a comparable ETF)?

    Also check dividend returns, not just price.

    If it has outperformed, it's been money well spent. If not, you may want to look at alternatives.
     
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  4. sfdoddsy

    sfdoddsy Well-Known Member

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    It's hard to say what value you have received since the Praemium SMA doesn't mention performance or asset allocation on the site.

    But for reference $35,000 invested in the Vanguard Diversified High Growth fund with dividends reinvested seven years ago would now be worth $76,000. So just a bit more than your 101%.

    Fees would currently be .27% or $205 a year.

    The same amount just plonked in an Australian index fund like VAS would be worth $67K.

    Fees would be .14% or $93 pa.

    The adviser fee certainly seems a bit rich since the point of this SMA seems to be that the adviser doesn't have to do a thing.
     
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  5. Jasper

    Jasper Well-Known Member

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    Thank you for your help.

    What can I do to get out of my current arrangement? Everything I read makes me lean towards low cost index funds.

    As always, I appreciate your time.
     
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  6. Jasper

    Jasper Well-Known Member

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    OK I've started reading the PDS and will call them to see what I can do.
     
  7. Jasper

    Jasper Well-Known Member

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    Good news!

    Spoke to my advisor and asked about the fee. I didn't argue it much, just asked what it was and he suggested on his own that he would refund the fees! He will let me know how far it will be backdated soon.

    Small win!
     
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  8. Zenith Chaos

    Zenith Chaos Well-Known Member

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    106% return is confusing me. Is it 6% pa, 6% in total or 106% in total. The first and last would make sense. If you have only made 6% in 7 years then leave now.

    Regardless of performance, 1.6% is ridiculous, which is normal. You should be aiming for 0.3%. As stated previously you'd be hard pressed to beat VDHG in terms of risk reward and fees.

    Not advice.
     
  9. Jasper

    Jasper Well-Known Member

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    I put in 40k. It's now worth 73k. I hope that helps.

    Sorry that I don't know much about this stuff but I've just started reading Managed Funds for Dummies (and googling for extra info where needed) so my understanding is getting better than it was.
     
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  10. Zenith Chaos

    Zenith Chaos Well-Known Member

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    The performance has been reasonable, but as @sfdoddsy posted, VDHG at.0.27% fees would have outperformed. Make sure you get those fees refunded and if they question you use VDHG as an example.
     
  11. pwnitat0r

    pwnitat0r Well-Known Member

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    Then the return is only 82.5% over the last ~7 years?

    The fund has done 106% since inception? but you haven’t been invested in the fund since inception?
     
  12. Omnidragon

    Omnidragon Well-Known Member

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    You made 100% over 7 years, so around 11-12% IRR. And paying 1.6-2.0% management fee basically, since your balance would’ve been lower earlier.

    Seems ok to me, in same time Market is only up 60%
     
  13. ross100

    ross100 Well-Known Member

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    Can you claim these fees back on tax (adviser and non-adviser fees)