ISEQ ETF increases management fees to 1.9%

Anyone on here get the annual report from the ISEQ ETE where they propse to increase the management fee / expense ratio to 1.9%? This is unbelievable. This pretty much means everyone is going to sell or the find will be wound up.

Why oh why did I think it was a good idea to buy financial products provided by the Irish market. Rip off republic comes to mind.

Re: ISEQ Top 20 ETF - Management Fees

Wow that figure seems crazy. Are you sure the 1.9% refers to the TER (total expense ratio).

Yes, I got the report. In summary:

NCB manages the fund and have kept the TER at .5% up to April 2008.

They increased this to .75% in April 2008.

However, they are now proposing to have a minimum management fee payable to NCB of €250,000. Apparently, they have been losing money on this project and so have effectively been subsidising the fund.

As the fund has declined in value to €18m, the management fee and other expenses will bring the TER up to 1.9%.

It's a tough one. If James and others pull out, then the TER will rise as the fund size falls.

If he stays in and the share prices recover, the TER will drop.

The fund holders will get a chance to vote on this at the AGM. If they reject the proposal, then the fund will be wound up as NCB is no longer prepared to subsidise it.

But we are actually stuck in the fund in reality. If you sell out now, you will not be able to set your losses against any capital gains you have.

By holding on to the investment, any gains for the forseeable future will be tax-free as you will be recovering losses.

If you sell out now and reinvest the proceeds in say a unit-linked fund, any gain in the unit-linked fund would be taxed at 25% exit tax.

So, I think we have to approve it.

I will propose at the AGM that there should be a quid pro quo. That when the fund rises in value so that the fee will be in excess of €250,000 per annum, that the fee is limited to €250,000.

Brendan

Wow is right. The TER when it was launched was 0.5%. I don't remember it being highlighted that this was below cost selling and that they would have to increase the TER at some stage. Second, as we all know stock markets are volatile. It was also not mentioned that the TER would increase as the markets fell.

This is just complete dishonesty and lack of clarity when the fund was launched. The chances of a market fall we have seen are not that low, so therefore risks should have been highlighted that this product would become completely uncompetitive within 3-4 years.

This is not right. 1.9% for a passive fund is laughable.

Hi James

The .5% was a fair figure at the time.

There was a risk that it might rise and this should have been disclosed. It may have been, I didn't see it if it was.

However, it was unlikely to rise. It would not have risen had more people invested or if the markets had not fallen by so much.

Brendan said:

But we are actually stuck in the fund in reality. If you sell out now, you will not be able to set your losses against any capital gains you have.

By holding on to the investment, any gains for the forseeable future will be tax-free as you will be recovering losses.

If you sell out now and reinvest the proceeds in say a unit-linked fund, any gain in the unit-linked fund would be taxed at 28% exit tax.

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Beg to disagree There is no tax advantage for current holders of underwater ETF. Their position is tax neutral. If the price rises there is no tax and if the price falls no tax relief. Certainly don't go into a Unit Fund which is tax asymmetric. But get out now quick before that TER soars and set into a rolling ISEQ spread bet, which is similarly tax neutral and much less expensive.

Actually maybe there isn't a spread bet on the ISEQ.