More than a third of investors consider performance the single most important factor when choosing a fund.
2:35PM BST 08 Apr 2013
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Consumers rank past performance as the most important consideration when choosing a prospective investment, followed by who the fund manager is and how the portfolio is distracted.
Although fees and charges are a hot topic among investment forums and financial advisers, the survey, conducted by the Association of Investment Companies (AIC) using survey data from Morningstar, revealed investors themselves care less about cost.
Jacqueline Lockie, at the AIC, said that investors should rethink their priorities when it comes to constructing their own portfolios.
She considered portfolio composition by far the most important of all the options.
"Research shows us that the way to control returns is to identify the asset allocation," she said. "It’s all about risk."
She considers charges the second most important factor: "All charges on a fund drag back its performance and reduce it. If a fund increased by 7pc in the last year, but the total charges were 1.5pc, the returns to the investor would be only 5.5pc. The bigger the charge, the harder the fund has to work to stand still."
Last week, the chief executive of the Investment Management Association called on fund managers to reveal real investing costs and set out charges on annual statements as pounds and pence.
The charges levied on investments and pensions have come under intense scrutiny in the past two years. The Telegraph has led a powerful campaign against high fees on retirement savings, in particular.
Critics say most fund managers are failing to reveal the true cost of investing. The vast majority of managers of unit trusts and Oeics, the most commonly held investments, advertise an annual management charge, which is normally around 1.5pc.
But this doesn't include the other costs of investing. Analysts also use a measure called the total expense ratio (TER) to compare funds but even this does not capture the full cost.
