Fees, charges and other costs

Fees and charges vary widely between investment companies, and tend to be higher in more specialist sectors.

The AIC website presents two figures that summarise the fees and charges of each investment company.

  • Ongoing charge. This is the regular, recurring cost of running the investment company. It is the equivalent of the ongoing charge figure (OCF) quoted on an open-ended fund's KIID, and includes elements such as the annual management charge, directors’ fees, and the cost of producing reports and accounts.
  • Ongoing charge plus performance fee. This is the ongoing charge, plus any performance fee that was paid in the last financial year. Not all investment companies have a performance fee arrangement in place, but many do, especially in more specialist sectors.

For every member company, the AIC website lists the ongoing charge, ongoing charge plus performance fee, and the details of the management agreement, including details of any performance fee arrangement that is in place.

Costs on the Key Information Document (KID)

The AIC ongoing charge and the ongoing charge on an open-ended fund’s KIID are directly comparable. Unlike these figures, costs on an investment company’s Key Information Document (KID) are disclosed on a MiFID basis.

They include everything that is included in the AIC’s ongoing charge figures, but also additional elements such as transaction costs and gearing costs. Transaction costs are presented on a separate line, while gearing costs are typically included in ongoing costs.

Performance fees are also included in an investment company’s KID.

External costs

External costs include dealing costs and taxation. They are not charged by the investment company but result from buying, selling or holding its shares. As such, they are not included in cost disclosures provided on the AIC's website or in investment companies' KIDs.

These include:

  • Dealing commission to a broker or platform when you buy or sell shares
  • The bid/offer spread (as a rule of thumb, the smaller the investment company, the wider this is)
  • Stamp duty of 0.5% when you buy shares in a UK investment trust (not applicable to non-UK investment companies, investment companies quoted on AIM, or newly issued shares)
  • Panel on Takeovers and Mergers (PTM) levy of £1 on transactions of more than £10,000
  • Percentage-based charges that a platform may impose for holding assets on the platform

Naturally, taxation on income and capital gains still applies, except in the case of Venture Capital Trusts (VCTs) and investment companies held within a tax wrapper such as an ISA or a SIPP.