MONEY COMMENT
Twenty Terrible Trackers

By Cliff D'Arcy
September 9, 2003

Regular visitors to the Fool site will know that we are big fans of the humble index tracker. Thanks to their low charges, trackers give investors cut-price access to stock-market returns. What's more, they are simple to understand, flexible, plus they outperform around three-quarters of highly paid 'active' fund managers over the long term. Also, you can put a tax-free ISA wrapper around your tracker to protect your returns from tax.

When choosing a tracker, we look for three things:

• No initial charges
• No exit (withdrawal) penalties
• Low annual management charges

However, not all trackers get the thumbs up from the Fool. Some bring shame on the tracker family name by charging far, far too much. Amazingly, some groups have the nerve to charge as much for computer-managed trackers as they do for actively managed funds. A couple really take the biscuit by including penalties for withdrawing your money, which is bang out of order!

Here's a list of twenty of the worst UK trackers, taken from financial adviser Chartwell's Guide To Trackers, sorted by total charges over ten years, details as at 31 January 2003:

FTSE 100 Trackers

Fund Group         Initial charge  Annual charge  Total charges over ten years
Scottish Amicable       4.75%          1.75%            22.25% ***BOOBY PRIZE!***
HSBC                    4%             1%               14%
Credit Suisse*          3.25%          1%               13.25%
Sovereign               2.5%           1%               12.5% (0.5% exit penalty)
Aegon                   0%             1%               10%
Direct Line             0%             1%               10%
Gartmore                0%             1%               10%
ISIS                    0%             1%               10%
Marks & Spencer         0%             1%               10%
Norwich Union           0%             0.9%             9%

* No initial charge for ISA investments

FTSE 250 Trackers

Fund Group  Initial charge  Annual charge  Total charges over ten years
Govett           3.5%            1%              13.5% (£30 withdrawal penalty)
HSBC             0%              0.75%           7.5%

FTSE All-Share Trackers

Fund Group     Initial charge  Annual charge  Total charges over ten years
St James' Place    3.75%           1.25%            16.25%
Eagle Star         5.5%            1%               15.5%
AXA                0%              1%               10%
ISIS (reo Tracker) 0%              1%*              10% (*now 0.3% due to merger)
Old Mutual         0%              1%               10%
Virgin             0%              1%               10%
Norwich Union      0%              0.9%             9%
DWS                0%              0.75%            7.5%

More: Learn about Index trackers and ISAs.