Aberdeen Diversified Income & Growth IT charges

[EthicsGradient]

I hold shares in this trust, and online sources (including Aberdeen (Standard)'s own web pages) say the ongoing charges are 0.88% per year, or so (which looks average for an investment trust). But last week, I got a yearly summary from them in the post, which says the ongoing charges were an eye-watering 2.07% (and that's not including transaction costs inside the trust - another 0.3%). I emailed them to ask what was going on, but despite their promise to reply within 5 working days, have heard nothing.

Has anyone else invested in this trust, or other Aberdeen Standard ones, and have recently got a summary of the yearly expenses? Was it in the range you expected?

[Alaric]

I hold shares in this trust, and online sources (including Aberdeen (Standard)'s own web pages) say the ongoing charges are 0.88% per year, or so (which looks average for an investment trust).

A lot of its holdings appear to be in other Collective Investment funds, so there's scope for double charging. Thus 0.88% is the charge made directly and the higher figure includes all the charges in the underlying investments.

The other possibilities are that there's a performance fee (but I din't see any mention of one) or that interest on borrowings has been added back to expenses.

[EthicsGradient]

Thanks - searching through similar threads, I did find this one, suggesting borrowing costs can be responsible for increasing the 'Ongoing Charges' or 'Ongoing Costs' amount in the newfangled Key Investment Document, which appears to be what I got in the post (as opposed to the Ongoing Charges Figure).

(but since I'm a newbie, I'm not allowed to post links. Oh well, it's titled 'Yet another IT cuts management fee', and is from late January)

It does have gearing of about 10%, so there should be borrowing costs. Aberdeen Standard would help themselves if their description of 'Ongoing Charges' mentioned borrowing, rather than just "annual management charges and other fund expenses", which doesn't sound any different from the OCR.

The annoying thing is that when I invested, it was the Edinburgh (late Aberdeen) UK Tracker trust, tracking the FTSE All Share index, with low costs. In 2017 they just announced that trust was being merged with this quite different trust. I did decrease some of my holding then, and am thinking of doing so again.

[SalvorHardin]

The high "ongoing charges" arise because of the way that the Key Investor Information Document (KIID) calculates charges. They take the annual management charge (0.88% for this trust), add any interest paid on its borrowings, add in other fees (e.g. custody), then build in an allowance for dealing costs and the bid-offer spread.

I haven't gone further into looking as to how they derive dealing costs, etc. I'm also wondering whether they account for the higher investment returns that could be earned because of the borrowings? (this should reduce the charges)

I suspect that most of us on TLF pay attention to the annual management fee and ignore everything else that they use for the KIID. That's what I do. Dealing costs in particular should not be included in annual charges because doing so assumes that they are repeated every year in the same proportion - which is nonsense.

One such trust is Finsbury Growth & Income, where the manager has been known to go several years without changing its holdings (except for top ups using new monies from issuing new shares).