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Woodford Equity Income offers 0.65% share class

Fund charges are tumbling. Neil Woodford’s new fund will be available at an annual charge of 0.65% if you pick the right share class.

Woodford Equity Income offers 0.65% share class

Investors wishing to get into Neil Woodford’s new fund at a reasonable rate got good news today as his firm confirmed it would compete on price.

Woodford Investment Management, the firm set up by the former Invesco Perpetual star, has unveiled details of his new Woodford Equity Income fund.

The fund will offer four share classes with varying annual management charges (AMC) for different groups of investors when it launches on 2 June (see table).

Share classes: A (direct investors) C (platforms, financial advisers) Z (big platforms) X (legacy insurance funds)
Annual / ongoing charge 1% 0.75% 0.65% 1.50%
Minimum investment / level of business £150k £50m £500m £1m

Source: Woodford Investment Management

A ‘C’ share class will carry the new industry standard AMC of 0.75% a year. It will be available to investors buying the fund on most fund supermarkets, online stock brokers or through financial advisers.

There will also be a ‘Z’ share class with a lower AMC of 0.65% offered to big investment platforms that can bring in lots of investors.

A spokesman for Woodford Investment Management said the Z share class was available to any organisation that could deliver large volumes of business. This implies that it is not just a special offer to Hargreaves Lansdown, the country’s biggest fund supermarket, which has negotiated lower AMCs on 27 funds in its Wealth 150+ range.

In practice though, other platforms may struggle to meet Woodford’s terms. According to the company’s website, it is looking for firms who offer the Z shares to introduce up £500 million to the fund.

Will Woodford go lower?

There is a possibility that Hargreaves may convince Woodford to offer an even cheaper AMC as the two sides are still negotiating what its offer will be. 

A spokesman for Hargreaves said: ‘We are hoping to offer our clients a lower price than the standard AMC and will confirm prior to the start of the offer period on 2 June.’

He declined to comment on whether the ‘standard AMC’ it was looking to discount was the 0.75% or 0.65% share class.

Either way, the 0.75% is well below the 0.92% ongoing charge taken by Invesco Perpetual on its Income and High Income funds that Woodford used to run. This may encourage more of Woodford's former investors to transfer to his new fund.

Craig Newman, Woodford Investment Management's chief executive, said: ‘We are able to keep our fees low, through the use of modern technology and encouraging investors to use fund platforms, execution-only brokers and financial advice channels, rather than buying directly from us.’

Referring to fund managers who continue to charge direct investors initial charges and higher AMCs, he added: ‘Many investors are still needlessly paying higher fees as a result of buying directly from fund management companies in the past.’

Don't buy the 'A' shares

The Oxford-based firm is discouraging direct investors with an ‘A’ share class carrying an annual management charge of 1% and a minimum investment of £150,000.

The 'X' shares charging 1.5% a year should also be avoided. They are meant for insurance funds still using the old 'bundled' charging system.

The fact that a 1% AMC is considered high demonstrates the revolution that has swept fund management since the abolition of commission payments to advisers and fund platforms last year.

Previously the standard AMC of a fund investing in shares was around 1.5%. Today, investors pay much lower AMCs on their funds but have to pay a separate platform fee on top. Hargreaves offers lower AMCs on some funds but this is offest by the fact that its annual platform fee is higher than rivals: 0.45% versus 0.4% from BestInvest; 0.35% from Barclays Stockbrokers, Fidelity Personal Investing and TD Direct; and 0.25% from Charles Stanley.

For more details see: 'How fund supermarket charges compare'.

Woodford Investment Management has also taken a leaf out of Invesco’s book by absorbing all fund-related expenses into its AMC. This means there is no difference between the AMC and the ‘ongoing charge’ which is the new way investment groups disclose their charges. The ongoing charge does not include stamp duty and dealing commissions, however.

It has also ended an relationship with Oakely Capital Management, the private equity firm which helped Woodford's team set up the firm while waiting to receive authorisation from the Financial Conduct Authority.

A business 'fit for the 21st century'

Watch Neil Woodford talk about his new business, how he intends to run the new fund and the recent fine Invesco Perpetual received for breaches relating to his old fund.

9 comments so far. Why not have your say?

Tony Peterson

May 08, 2014 at 17:16

However, if you take control of your own investments, you pay zero percent.

You can absorb the charges into thin air.

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Dylantherabbit via mobile

May 08, 2014 at 20:44

0.65% should be the maximum charge. This fund will be in the £billions. There is no reason why it cannot charge 0.5% or less.

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Jack Daniels

May 09, 2014 at 10:04

Tony - how? What about stamp duty, dealing commission (in and out) on every trade and re-balance? I presume you are talking about shares since ETFs and ITs have their own charges.

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Tony Peterson

May 09, 2014 at 10:51

Jack Daniels

I should have been more explicit - I was thinking of continuing capital charges of course. And yes, I was talking about shares. Of course I have to pay a half of one percent stamp on many (not all) buys, and dealing commissions of under five pound. AIM stocks are now exempt from stamp duty. As are foreign domiciled ones. There has never been an easier, or more profitable time to be a stakeholder in our major enterprises.

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May 09, 2014 at 11:14

Can anyone tell me, is there a list of "Z" platforms?

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Rick Sarum

May 10, 2014 at 10:02

Isn't Hargreaves the only "Z" platform at present?

I wonder how many people who like me held a lot in IP Funds managed by Woodford are a bit miffed about the recent discomfort he caused? I got my money out before they tumbled and am now invested quite happily elsewhere.

I don't feel inclined to take a chance on his new untested funds right now.

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Tony Peterson

May 10, 2014 at 10:21


Why not be your own fund manager? - it's a lot cheaper, particularly when what you actually save increases by the miracle of compound growth.

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May 10, 2014 at 11:58

I think Alliance Trust Savings has some Z shares.

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May 11, 2014 at 15:55


I have just looked at the ATS List of Funds pdf and you are right. But only a few of the funds are "Z". This seem to be very fund manager specific eg most of these are by Invesco & Shroders with a sprinkling elsewhere.

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Charles Stanley drops Woodford from fund buy list

by Daniel Grote on May 22, 2018 at 10:57

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