Low-cost investment funds offer an immediate advantage, but there is a huge misconception that “Passive Funds” including ETFs are the only low-cost solution.
In Ireland, the perhaps surprising fact is that many leading “Active Funds” can be accessed at the same or a similar cost, if you choose the right financial broker, and wish to take advantage of a more flexible blended approach.
But, before we look at these funds, it is also important to understand, that the Investment Plan Type e.g. Investment Bond, Pension Plan, PRB, Post-retirement ARF, as well as the Broker Charge, also play their part in the real cost of fund-based investing.
What is Active Investment?
Active investing means investing in funds whose portfolio managers select investments based on an independent assessment of their worth—essentially, trying to choose the most attractive investments. Generally speaking, the goal of active managers is to “beat the market,” or outperform certain standard benchmarks. This is referred to as seeking Alpha.
What is Passive Investment?
Passive management is an investing strategy that tracks a market-weighted index or portfolio. Passive management is most common in the equity market, where index funds track a stock market index, but it is becoming more common in other investment types, including bonds and commodities.
What is the difference between ETFs and Passive Funds?
Both ETFs and index funds are pooled investment vehicles that are passively managed; the key difference is that ETFs can be bought and sold on the stock exchange (just like individual stocks) — and index funds cannot.
The Investment Plan Type
Many of the world’s leading passive fund managers are only accessible in Ireland via a financial broker, such as Vanguard, BlackRock, and State Street, and dependent on the type of Investment Plan, as well as your broker’s remuneration basis, different levels of additional costs will be added to the base fund managers annual charge.
Below we cover various types of investments, from lump-sum Investment Bonds to ARFs, at retirement and detail our fully transparent total annual charges, inclusive of ongoing advice and support.
Our Low-Cost Investment Funds – Annual Charges
- From 0.75% PA on ARFs.
- From 0.85% PA on PRBs.
- From 1.00% PA on Master Trust – Executive Pension Plans.
- From 1.00%% PA on Personal Pensions.
- From 1.00 % PA on Non-Standard PRSAs.
Low-Cost Investment Funds – Passive or Active Investment
A Vanguard paper in 2009 addressed the notion that active managers could protect their shareholders during market drawdowns by tactically shifting to safe assets like cash or more defensive stocks. The researchers found that there were some bear markets where most active managers were able to provide this benefit. However, the actively managed funds that delivered superior performance varied from one drawdown (relative peak to trough values) to the next.
That led the researchers to conclude that active managers could not consistently provide a cushion when the market declined, meaning index-fund investors were not necessarily disadvantaged by staying fully invested over multiple market cycles (provided they had a sufficient time horizon) and indeed, a key part of providing investment advice is the client’s investment time horizon.
It could reasonably be argued that in times of high volatility with shorter investment periods, Active Management has its advantages over Passive. In a market sell-off, passive funds will simply follow the market lower, whereas Active fund managers can spot opportunities for returns and seek ways to minimise the impact of a downturn. By passively investing in an index you are accepting that you will never return more than the market.
For these reasons here at One Quote Financial Brokers, we always evaluate both approaches, with an individually tailored methodology in constructing our client’s personalised portfolio.
And, even though it is often cited that the average active investment manager does not outperform their passive equivalent over the long-term, in our view, the key is to employ a robust and rigorous manager selection process to ensure that the selected investment manager is not average but best in class.
Carefully selected active investment managers chosen in this way should be used to supplement the passive core of a portfolio.
Low-Cost Investment Funds – FAQs
1. Do you offer Vanguard Funds?
Yes, we offer the following Vanguard Funds, starting at low-medium risk, right up to high risk:
- Vanguard Emerging Market Stock Index Fund
- Vanguard Eurozone Stock Index Fund
- Vanguard Global Stock Index Fund
- Vanguard US 500 Stock Index Fund
- Vanguard Euro Government Bond Index Fund
- Vanguard Global Bond Index Fund
- Vanguard Global Corporate Bond Index Fund
2. What other passive fund managers do you offer?
Our other passive fund manager options include:
- State Street Global Advisors
- BlackRock
- Standard Life
- Dimensional
- Invesco
- L&G Investment Management
- Aviva Investors
- Royal London
3. Which Active fund managers do you offer?
- State Street Global Advisors
- BlackRock
- State Street Global Advisors
- BlackRock
- Amundi
- ABRDN
- BNY Mellon
- Cantor Fitzgerald
- Columbia Threadneedle
- Davy
- DWS
- JP Morgan
- Good Body
- SSGA
- Aviva Investors
- Fidelity
- Standard Life
- Setanta
- Royal London
- Zurich
Contact Us
Contact: Ken O’Gorman – Director – QFA, CB, SIA – Investment Specialist – One Quote Financial Brokers on: 01 845 0049 or email: ken@onequote.ie
Or enquire online and give us a quick outline of how we can help.
