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Richard Branson criticised for promoting rip-off fund


Investors who have decided to abandon “star” fund managers in favour of funds that simply track the stock market are being warned to resist advertising for a tracker fund from one of Britain’s most admired brands.

Sir Richard Branson’s Virgin Money has been promoting its FTSE tracker fund via press advertisements and online. But anyone who buys this fund will pay up to 12 times more than the cost of an identical fund from a cheaper provider.

The annual charge on the Virgin FTSE All Share Tracker is 1pc, whereas Vanguard’s FTSE UK All Share Index fund – which does exactly the same job of replicating the performance of the London stock market – has an annual charge of just 0.08pc. Other fund firms also offer UK trackers that are far cheaper than Virgin’s; they include Legal & General, whose UK Index fund can be bought for as little as 0.1pc a year.

Such cost differences can make a huge difference to your eventual returns. Which?, the consumer group, found that the Virgin fund would have turned £10,000 into £17,520 over the past five years, whereas Vanguard's equivalent would have delivered almost £2,000 more over the same period.

Virgin’s recent promotion of its tracker fund appears to be a result of recent changes to the Isa rules, which allow savers to shelter up to £15,000 a year from tax. According to figures released this week, tracker funds are attracting a large portion of Isa money, with savers putting a record £532m into these funds in July.

The Virgin advertisements played heavily on Sir Richard’s public profile, with his picture and a quote: “Our straightforward approach to investment means you don’t have to be an expert to benefit from the stock market.” He referred to “one simple ongoing charge” – but did not state the actual figure.

Sir Richard told Which? he was “proud” to endorse the Virgin fund. “I have always personally endorsed our UK All Share fund and proudly continue to do so,” he said. When asked about the fund’s inferior performance, Sir Richard said: “I simply don’t believe this to be true.”

Today The Telegraph calls on Sir Richard to scrap the current charge on the tracker and bring it closer to the figure charged by his more competitive rivals.

Savers should remember that the fund manager’s charge is not normally the only cost of investing. Although investors can hold the Virgin fund directly through the company, trackers are normally bought via “fund shops” that levy their own charges on top. These can be flat fees or percentages, typically of 0.2pc-0.45pc a year.

A spokesman for Virgin Money said its charge was “clear and transparent and there are no hidden, additional fees”. He added: “To simply compare Vanguard’s 0.08pc charge to Virgin Money’s 1pc charge is not a fair comparison of total cost.”

Source: Telegraph

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