Investment strategies with lower fees don’t necessarily produce higher net returns and investors should look to underlying value for money, according to IOOF.
Speaking to InvestorDaily, IOOF Australian equities portfolio manager Dan Farmer said fees had become a bigger concern for investors in the current lower return environment as they’re “chewing up more of [investors’] total return”, noting the increasing popularity of passive strategies.
“It can be a little bit dangerous to sort purely on fees, and I guess that’s been what’s happening with passive, that low fee is very attractive, so we would caution against that,” Mr Farmer said.
Mr Farmer said that while lower fees look attractive in a lower return environment, investors needed to look at the overall net expected returns when choosing an investment strategy.
“Really what they should be doing is looking through to the value-for-money for the fees they’re paying, so in other words: what excess return can you expect to get for the additional fee you’re paying over and above passive?” he said
“You really need to look through and think about what net returns they’ll generate after their fees have been paid.”
Mr Farmer’s comments echo remarks made by Harvest Lane managing director Luke Cummings, who told InvestorDaily that high fees for actively managed strategies were driving investors towards passive products.
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