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Press Release

Friday 27 January 2012

The Investment Management Association (IMA) has released new analysis which examines how trading costs impact on investors’ returns. These costs are incurred as a result of the manager making investment decisions in accordance with a fund’s investment objectives and strategy.  While some commentators claim they are not disclosed to investors, these costs are readily available in fund literature and investment fund regulation requires their disclosure.*
Using fund literature, the IMA analysed the fund accounts of a number of large UK All Companies funds in 2009.  For the actively managed funds, the transaction costs were 0.31% of average assets, of which two-thirds was accounted for by stamp duty. In tracker funds, transaction costs totalled 0.06%.

These transaction costs are very small for index tracking funds and are on average more than offset by investment returns in the case of active funds. This is confirmed by IMA’s latest analysis, which compares the average net return of 129 active and passive funds in the UK All Companies sector,** with that of two benchmark indices, the FTSE 100 and the FTSE All Share. 

The IMA compared the annual difference over the ten year period to December 2011 between the return on the benchmark and what the investor would have received after charges. It found that:

  • For the tracker funds, the Total Expense Ratio (overall charges) was broadly the same on average as the difference between the benchmark return and the fund return.
  • For the actively managed funds, the difference between the net fund return and the benchmark return was on average significantly less than the TER, confirming that the transaction costs were more than covered by the investment returns from active management.

While transaction costs can only be implied from this data, there is nothing to suggest that they are significantly hampering fund performance. 

All figures as at December 2011

Annualised fund return (income reinvested)

Annualised Benchmark return (income reinvested)

Annual difference

Average TER

FTSE 100 trackers 10 years





FTSE All Share trackers 10 years





Active funds 10 years





Commenting, Richard Saunders, Chief Executive of the IMA, said:

“People need to save for the long term.  They do not need to be scared off by false stories that if they do so they will be ripped off by the industry. The IMA’s figures demonstrate clearly that so-called hidden charges which cost investors billions a year are a complete myth.  If the accusation were true, it would show up in the net returns achieved by investors.  But there is no sign of it.  The accusations of hidden charges do not stand up.”


Notes to Editors

* It is a regulatory requirement to disclose trading costs in the fund’s report and accounts. When a fund manager buys and sells shares he incurs trading costs. A fund manager does not know in advance what trades he will undertake so he cannot tell what trading costs will be incurred. 

** Definition of IMA UK All Companies Sector
Funds which invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth.


  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The "look-through" principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where such entities themselves invest in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company.

For further information please contact:
Clare Murphy-McGreevey, Media Relations Manager, IMA, 020 7831 0898 or 07843 517618
Mona Patel, Head of Communications, IMA, 020 7831 0898 or 07834 089332
About the Investment Management Association
The IMA is the trade body for the UK's £4 trillion asset management industry.  The money its members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.  Our purpose is to support and promote a commercially successful and growing UK investment management industry as we seek to improve the financial outcomes for customers - savers and investors.

Investment management association