Woodford stops charging investors for research costs

Research costs for the CF Woodford Equity Income Fund are now met by Woodford Investment Management, instead of being deducted from the fund under transaction costs.

Research, which is provided by brokers and independent third-party providers, is usually part of the transactional costs paid by investors. The Financial Conduct Authority estimates that around £1.5 billion is paid to brokers annually for providing investment research to the fund manager.

Currently, the main way investors compare investment fund costs is to look at the ongoing charge figure (OCF). This is the fee that's quoted on fund factsheets.

However, the OCF does not reflect the thorny issue of transaction costs. These include the cost of trading shares, commissions paid to brokers, the bid-offer spread and stamp duty.

Transparency

Craig Newman, chief executive at Woodford Investment Management, says: "We are acutely aware that it is investors' money, not ours, we are investing.

"Just as investors deserve to know where their money is invested, they also deserve to know how we have spent their money to make those investments."

Woodford wants investors to be able to see the total costs taken from the fund, including how much they have paid to buy and sell stocks within the portfolio, and how much they have to pay in subsequent taxes.

For this purpose the company will provide a monthly breakdown of all the fees it charges investors for its CF Woodford Equity Income fund on its website.

"Research costs are a function of our role and we believe it is only right that Woodford, not our investors, pay for it," adds Newman. "Only by knowing all the costs will investors be able to make a considered judgement on whether they are getting value from their fund manager or not".

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.